Bottom Line: Newly elected Iranian President Hassan Rohani has chosen his new oil minister, but the Supreme Leader is sending signals that the choice is not acceptable to hardliners.
Analysis: Rohani has chosen Bijan Namdar Zanganeh for the country’s new oil minister. Zanganeh has served as oil minister before, under president Mohammad Khatami. He left the post in 2005. Hardliners see him as too soft and there feathers were particularly ruffled by Zanganeh’s record of selling gas below market prices to foreign countries. That the Iranian Supreme Leader is against Zanganeh’s appointment was made clear in a scathing criticism of him that appeared in an Iranian newspaper controlled by the Supreme Leader’s camp. They are setting Zanganeh up for public criticism as an untrustworthy figure who does not work in the national interest. At this point it is unclear where the new oil minister would stand on current Oil Minister Rostam Qassemi’s recently announced plans to move towards the production of oil products for domestic use and exports and away from crude exports with the launch of construction of the new Zanjan refinery this week. This is in line with an April announcement by Iran that it planned to complete four new refineries by March 2014.
Recommendation: As we mentioned in last week’s briefing, we see opportunities ahead in Iran, and we will thus be focusing a significant amount of attention on developments here as they emerge. Following the possible shift in the Oil Ministry leadership will be telling. Zangeneh is the best choice for the oil ministry at present. He has been in the government at a senior executive level continuously for all but two years after the revolution. He knows the oil industry in and out. He has very good contacts with foreign oil companies, which will be critical once the market is opened up to Western companies again. He is also a Rafsanjani protégé. It will be a tough fight over his nomination this week, however, in parliament, but our sources are fairly optimistic that he will prevail.