Introduction

The symbol of Iran’s independence is not the magnificent Azadi Tower that marks the formal entrance to Tehran, but the rather humble stone building on the corner of Taleghani and Hafez avenues, the headquarters of the National Iranian Oil Company. In 1951 Iran’s oil company, more commonly referred to as NIOC, was the second major oil company to be nationalized (after Pemex). Unlike the swift nationalizations of the early 1970s that created most of today’s national oil companies (NOCs), NIOC’s nationalization began much earlier with a series of failed and quasi-nationalizations before it became fully nationalized in the period 1974–1979. Since its founding, NIOC has been the center of the country’s economy, providing more than 45 percent of Iran’s exports in the 1950s and peaking at 97 percent of exports at the height of the great oil shock of 1973–1974 (CBI 1980/1981–2008/2009; Karshenas 1990). In addition, NIOC supplies politically visible goods and services, including a costly but very popular subsidy for gasoline that makes retail energy in Iran nearly free. Nearly all politics in Iran is at some level connected with NIOC and the hydrocarbon industry. Despite successful efforts to partly diversify the economy, the country remains in some respects heavily dependent on hydrocarbons: For the 2006–2008 period, oil and gas sales made up 80% of total exports and 50% of government revenue (though only accounting for 15% of GDP) (CBI 2008/2009; World Bank 2009).

Previous studies on NIOC have focused on the fact that while the NOC has vast oil and gas reserves at its disposal the enterprise performs poorly. Some studies have addressed Iran’s “resource curse,” finding that increased government revenue from oil sales has damaged the country’s economy and hindered democracy (Fardmanesh 1991; Khajehpour 2001). Some blame the petroleum industry’s shortcomings on the structure of the Iranian government as a “rentier state” that overtaxes the oil industry (rather than broader economic activity) to sustain government expenditures (Mahdavy 1970; Katouzian 1981; Skocpol 1982). More recently, two studies focus on the company itself, analyzing its organizational structure, the relationship between the company and the state (decision-making processes, financial flows), and the company’s world-views (Marcel 2006; Brumberg and Ahram 2007). Despite keen interest in NIOC’s operations, however, it has proved extremely difficult to unravel and assess the deep-rooted bureaucracies of Iran’s government and petroleum sector. The present study aims to provide more clarity by focusing, especially, on how NIOC’s structure and operations are integrated with the Iranian state and the company’s political masters.