Iran


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Iran is the second-largest oil producer in OPEC after Saudi Arabia, producing 4.2 million barrels a day in 2011. Oil and gas production accounted for 50 percent of government revenues and 74 percent of exports in 2010. Iran's petroleum industry is generally regarded as complex and non-transparent. International sanctions impose significant external restrictions on the industry, which nonetheless generated 32 percent of gross domestic product in 2009.


Iran's Performance on the Resource Governance Index

Iran received a "failing" score on all four components, leading to a composite score of 28 and a ranking of 53rd out of 58 countries.

Rank
(out of 58)
Score
(out of 100)
53 Composite Score 28
54 Institutional & Legal Setting 26
Freedom of information law 0
Comprehensive sector legislation 67
EITI participation 0
Independent licensing process 0
Environmental and social impact assessments required 0
Clarity in revenue collection 50
Comprehensive public sector balance 44
SOC financial reports required 0
Fund rules defined in law 100
Subnational transfer rules defined in law 0
46 Reporting Practices 33
Licensing process 33
Contracts 0
Environmental and social impact assessments 0
Exploration data 50
Production volumes 50
Production value 67
Primary sources of revenue 33
Secondary sources of revenue 100
Subsidies 0
Operating company names 0
Comprehensive SOC reports 33
SOC production data 19
SOC revenue data 0
SOC quasi fiscal activities 17
SOC board of directors 50
Fund rules 100
Comprehensive fund reports 33
Subnational transfer rules 0
Comprehensive subnational transfer reports 67
Subnational reporting of transfers 0
52 Safeguards & Quality Controls 26
Checks on licensing process 44
Checks on budgetary process 67
Quality of government reports 33
Government disclosure of conflicts of interest 0
Quality of SOC reports 0
SOC reports audited 17
SOC use of international accounting standards N/A
SOC disclosure of conflicts of interest 0
Quality of fund reports 83
Fund reports audited 33
Government follows fund rules 50
Checks on fund spending 0
Fund disclosure of conflicts of interest 0
Quality of subnational transfer reports 33
Government follows subnational transfer rules 0
42 Enabling Environment 23
Corruption (TI Corruption Perceptions Index & WGI control of corruption) 27
Open Budget (IBP Index) N/A
Accountability & democracy (EIU Democracy Index & WGI voice and accountability) 6
Government effectiveness (WGI) 37
Rule of law (WGI) 20
Satisfactory Weak
Partial Failing
To explore all data and compare
scores, use the RGI Data Tool.

Institutional & Legal Setting (Rank: 54th/58, Score: 26/100) learn more

The legal framework governing the petroleum sector does not foster competition or encourage public accountability, earning a "failing" score of 26.

The Petroleum Ministry grants licenses; however, it is essentially the same entity as the National Iranian Oil Company (NIOC), creating a situation in which the licensing and regulatory authority is also the rights holder. The NIOC, rather than the ministry, collects payments from subsidiaries and transfers them to the national treasury. Environmental and social impact assessments are not required, and there is no freedom of information act.

The use of "buyback" contracts, which most closely resemble service agreements, characterizes Iran's oil sector, in a system structured to keep foreign companies from owning reserves or production rights. Instead, Iran pays fees to foreign companies based on a negotiated return on their investment. As a result of opaque bidding processes, buyback contracts are often won by state-owned or quasi-private Iranian companies linked to the NIOC pension fund or the Revolutionary Guards.

Reporting Practices (Rank: 56th/58, Score: 33/100) learn more

Iran received a "failing" score of 33, reflecting insufficient disclosure on almost all aspects of the petroleum industry.

Detailed rules on the bidding process are not available. Contracts are awarded following closed negotiations and are not published. The Finance Ministry, Petroleum Ministry, and NIOC provide very little information on oil revenues; none has published an annual or quarterly report since 2004. Only Iran's central bank publishes information on resource revenues. Through its annual reports, the latest of which covers 2010, the bank provides aggregated data on production volumes, reserve levels, prices, dividends, and the value of resource exports.

Safeguards & Quality Controls (Rank: 52nd/58, Score: 26/100) learn more

Iran's "failing" score of 26 is the result of poor auditing standards and a lack of reporting requirements for state-owned companies.

However, the legislature plays an active oversight role in the oil sector. Lawmakers must approve NIOC's management policies, and annual audits of resource revenues are conducted and presented to a parliamentary committee—though the independence of state auditors is questionable. There is no way for outside entities to appeal licensing decisions, but lawmakers occasionally use their powers to void contracts with foreign companies. Government officials involved in the sector are not required to disclose potential conflicts of interest.

Enabling Environment (Rank: 42nd/58, Score: 23/100) learn more

Iran's "failing" score of 23 reflects particularly poor performance on measurements of government accountability and democracy.


State-Owned Companies (Rank: 40th/45, Score: 15/100) learn more

Iran's extractive sector is dominated by NIOC and its sister companies, the National Iranian Gas Company, the National Iranian Petrochemical Company, and the National Iranian Drilling and Exploration Company. NIOC is government-owned and provides subsidized fuel as well as a range of social services. It has not produced an annual report since 2004. National authorities audit the company, but it is unclear how effective these reviews are.

Natural Resource Funds (Rank: 11th/23, Score: 50/100) learn more

In 1999 Iran established an Oil Stabilization Fund, which was subsequently replaced by a National Development Fund. The fund receives a portion of oil revenues and is nominally overseen by the Central Bank. The bank documents withdrawals and deposits, but detailed rules on these transactions and the fund's current assets are not publicly available. The government occasionally fails to make required deposits and withdraws funds with proper approval. The national audit authority reviews the fund's financial reports but does not publish the results.

Subnational Transfers (Rank: 27th/30, Score: 17/100) learn more

Iran is a centralized state and lacks clear legal provisions for subnational revenue transfers. Central bank reports indicate that, in practice, two percent of subnational resource revenue is reallocated back to the province, but detailed information on these transfers is not published.

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