Iran’s oil minister has resigned days after allegations that an intermediary trust selling Iranian oil abroad owed millions of dollars’ worth of export receipts to the state. Mohsen Paknejad’s departure comes as Iran grapples with a dire economic situation, including inflation running at 85%. An overall drop in oil receipts has led to a massive shortfall in foreign exchange earnings and one of the biggest drops in the value of the rial since the Iranian revolution in 1979.
The Iranian president, Masoud Pezeshkian, said he had accepted the resignation of Paknejad, who had given personal reasons for going. The rial is trading more than 10% lower than a month ago, largely due to the US naval blockade preventing Iran from selling oil, the mainstay of government receipts. Emergency government meetings over the weekend to combat the crisis have yielded little tangible progress, and there are growing reports that the professional middle class, notably teachers and nurses, are resigning in large numbers because their salaries are not keeping up with price rises.
The central bank says its role is not to defend a specific rate, but manage fluctuations. Iran’s economy contracted by 10% in the first three months of the year. Despite concerns that continued sanctions may lead to protests, Iranian diplomats are not planning any new concessions after a proposal to speed the process of nuclear negotiations was rejected by Donald Trump a week ago.
Iran has been using informal networks known as “trustees” to bypass US sanctions and repatriate oil revenues. A report last week by the Farhikhtegan newspaper alleged that a trust set up on Paknejad’s watch to recoup income from Iran’s overseas oil sales owed the state-owned National Iranian Oil Company nearly $2bn (£1.5bn) in revenues. Three individual trustees awarded oil contracts allegedly owe hundreds of millions of dollars each to the NIOC.
Some of the leaks behind the reporting may reflect a power struggle inside the oil industry. Reza Sepahvand, a spokesperson for the parliament’s energy commission, has announced the launch of an inquiry. Although Iran’s oil export problem, and its impact on foreign exchange reserves, is primarily caused by the US naval blockade on Iran’s oil exports, reports of lax management or possibly corruption will do little to bolster confidence in government at a time when most Iranians are going through an unprecedented squeeze on their standards of living.
It is claimed the difficulties were regarded as so serious that they were conveyed by one security official to the president and then before the US attack on Iran in February to the supreme Leader himself. The president apparently took up the complaint with the oil minister but no satisfactory response was received. In an attempt to shore up public confidence in the government’s strategy, ministers have been seeking to rebut Donald Trump’s claim that oil is now flowing through the strait of Hormuz at near pre-blockade rates.
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