Corruption risks in the natural resources sector remain high. Iran’s natural resource potential is underutilized due to government mismanagement and prevalent corruption in the sector (BTI 2016). Iran is estimated to hold around 22 percent of global oil reserves, and the industry accounts for a major share of the country’s revenue. As it is Iran’s most lucrative sector, it is either controlled by the state or by those with close ties to the state (BTI 2016). Reporting practices in Iran are insufficiently transparent in terms of natural resource governance (NRGI). After sanctions on Iran were lifted, the oil minister urged foreign investors seeking to enter the energy market to deal directly with the ministry rather than use third parties (New York Times, March 2016). It is alleged that such middlemen were commonly used to sidestep oil sanctions. However, it is unlikely that this network will be dismantled completely in the near future, considering the middlemen are sitting on USD billions that the Iranian government hopes to reclaim, and also due to continuing sanctions imposed upon Iran by the United States, which makes conducting regular financial transactions difficult (New York Times, March 2016).
In a widely publicized case, billionaire and business tycoon Babak Zanjani has been sentenced to death for embezzling USD 2.7 billion for oil he sold on behalf of the Iranian oil ministry (BBC, Mar. 2016). The case is controversial as Zanjan’s defense is arguing that he helped Iran circumvent sanctions by selling oil abroad with the knowledge and backing of government officials (Reuters, Mar. 2016). Even the president criticized the handling of the case, questioning who enabled Zanjani to carry out such deals (Reuters, Mar. 2016). His death sentence was confirmed by Iran’s Supreme Court in December of 2016, but in the near-future, his execution seems unlikely in light of the fact that President Rouhani has stated that it will be hard for the Iranian government to recover the lost assets without Zanjani’s aid (Reuters, Dec. 2016). A man accused of being an accomplice of Zanjani was arrested in January 2017 (Al Arabiya, Jan. 2017).
In another case, Safdar Hossaini, chairman of Iran’s sovereign wealth fund, resigned along with his colleagues, after it was revealed that he earned over USD 23,000 a month, dozens of times more than the lowest-paid government workers (LA Times, July 2016). The fund is intended to reserve surplus revenues from oil and petrochemicl production for development and economic emergencies (LA Times, July 2016).