Iran admits sanctions hurting oil industry

Iran admitted on Tuesday that international sanctions imposed over its controversial nuclear programme were harming its ability to invest in oil infrastructure, the backbone of its economy.“The problems that they have made for banks have troubled financing of some projects,” Oil Minister Kazem Vaziri Hamaneh told the official IRNA news agency.

He said that the government was attempting to use its own resources, built up from windfall receipts resulting from the high world oil prices of recent years, to make up for the shortfalls in foreign investment.

“The government makes a decision in this respect using internal resources and the Oil Stabilisation Fund”, into which the government invests oil income that exceed the needs of normal state expenditures, the minister said.

Hamaneh’s admission contrasted with comments by hardline President Mahmoud Ahmadinejad on Friday in which he insisted that Iran was unfazed by the prospect of further sanctions.

“They cannot hurt us, not that they don’t want to but because they are incapable of doing do as they are in a difficult situation,” he said.

A veteran oil ministry official, Hamaneh was the president’s third choice for the position after parliament rejected his first two nominees.

The UN Security Council has adopted two sets of sanctions against Iran over its failure to heed ultimatums to suspend uranium enrichment, the process that produces fuel for nuclear power stations, but in extended form can also make the fissile core of an atomic bomb.

The UN sanctions so far have been largely focussed on Iran’s nuclear and ballistic missile programmes, but Washington has been putting pressure on international banks to curtail their business in US dollars with Iran.

In response to mounting US pressure, Iran said it would stop pricing its oil in dollars and replace the US currency with the euro in foreign transactions and state-held foreign assets.

But the existing sanctions and the looming threat of tougher ones have sparked concerns about investment risks in Iran, which needs foreign investment and know-how to develop its oil and gas infrastructure.

For years, Iran has been under unilateral US economic sanctions, which bar American oil companies from doing business with Iran and could punish foreign energy companies investing more than $20 million in its oil industry.

Ahmadinejad has vowed to press on with the nuclear programme and this month introduced a scheme rationing petrol, which he said had helped insulate Iran from the impact of any new sanctions.

“The enemies have admitted that controlling and reducing petrol consumption has made Iran invincible,” he said.