Financial Times: Iran's parliament has asserted its claim to control contracts signed by the government with international companies, highlighting a constitutional right that had fallen into disuse.
The move reflects the desire of a conservative majority elected in February to rein in the reformist government of President Mohammad Khatami in its last year of office. Financial Times

By Mohsen Asgari and Gareth Smyth in Tehran

Iran's parliament has asserted its claim to control contracts signed by the government with international companies, highlighting a constitutional right that had fallen into disuse.

The move reflects the desire of a conservative majority elected in February to rein in the reformist government of President Mohammad Khatami in its last year of office.

On Wednesday 108 out of 212 deputies voted for the legislation, which now goes to the Council of Guardians, an Islamic watchdog, for approval.

Mr Khatami, who must stand down as president next June, said the bill would lead to "interfering by the legislative branch in the responsibilities of the executive" and "inflict billions of dollars of losses on the country".

Abdollah Ramezanzadeh, a government spokesman, said the bill would "paralyse the government's power to pursue economic activities with foreign countries" but that it would accept parliament's decision.

Conservative deputies have criticised two deals with Turkish companies: Turkcell, contracted to operate Iran's second cellular phone network, and TAV which was authorised to run Tehran's new airport.

The Turkcell contract, signed in February, was due to bring in $7.5bn (€6.1bn, £4.2bn) in revenue over 15 years, said Farhad Sepahram, head of public relations at the ministry of communications and technology.

TAV's role at the Imam Khomeini International Airport was challenged when it was closed on its opening day in May by Revolutionary Guards (IRGC) who argued that the involvement of Turks threatened national security.

Parliament's shift to the right has combined with growing international pressure over Iran's nuclear programme to increase the guards' influence. "This faction wants to push the country into isolation," said a leading Iranian analyst.

Iran's economy, which grew by 6.7 per cent in 2003, depends heavily on oil and gas, responsible for some 80 per cent of exports.

Foreign investment is limited by state controls and economic sanctions introduced by the US after the 1979 Islamic Revolution and strengthened after the 1996 Iran-Libya Sanctions Act.

A privatisation programme has made limited progress under Mr Khatami and has been dogged by claims about the involvement of politicians of all factions in companies bidding for assets. The programme now faces hostility from the new parliament.

Government deals with foreign companies in the oil sector have taken the form of "buy backs" - disliked by the IMF and World Bank - under which the company finances and carries out extraction in return for payment from crude sales when the field is producing.

The debate was a thin veil for a power struggle between a reformist government and a conservative parliament, said Heydar Pourian, deputy general secretary of the Tehran metals exchange and a an advocate of deregulation.

"Ordinary Iranians sense this - they feel no benefit from the increase in per capita income from $850 to $1,800 in the last eight years because so much has been absorbed by the state," he said.