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. Last Updated: 07/27/2016

Iran's Oil Policy a Post-Election Question Mark

TEHRAN, Iran -- Mohammad Khatami, who won a shock landslide victory in Iran's presidential election, is unlikely to usher in major changes to Tehran's oil policy after he takes office in August, industry sources said Monday.

"Khatami has said very little on what he would do as president to the country's oil. ... I would not expect major changes for at least the first year or so of his government," one industry source in Tehran said.

Iran is the world's third-largest oil exporter, behind Saudi Arabia and Norway, and has a production quota of 3.5 million barrels per day in OPEC.

Khatami, who was backed by centrist supporters of President Akbar Hashemi Rafsanjani and reformist technocrats, is expected to stick to the country's five-year economic plan which is based on current exports of around 2.5 million barrels per day of crude until the year 2000.

The 54-year-old theologian is also unlikely to ditch the Petroleum Ministry's policy of maintaining output capacity into the next decade by allowing foreign firms to develop oil and gas fields under the "buyback" terms first offered in 1995.

One of the main challenges to Khatami's presidency will be U.S. sanctions, in particular the Iran-Libya sanctions act under which Washington threatens to penalize non-U.S. firms that invest $40 million or more a year in Iran's oil and gas sector.

Iranian foreign policy, and specifically Tehran's stance towards Washington, remains firmly in the hands of Iran's Supreme Leader Ayatollah Ali Khamenei.

Iran's Petroleum Ministry is in advanced negotiations with France's Total SA and Anglo-Dutch Royal-Dutch Shell to develop the huge South Pars gas field which will be a major element in Iran's plans to export gas to Turkey, the Indian subcontinent and eventually Europe.

Khatami will also oversee first production from the offshore Sirri A oil field being developed by Total and the development of the Balal oil field under a deal signed with a British-Canadian consortium.

Khatami committed himself during campaigning to boost foreign investment in Iran, though he said little specifically about the oil industry which earns Iran some $18 billion a year, or 90 percent of its foreign exchange earnings.

Khatami has not publicly expressed a view on world oil prices or Iran's stance in OPEC, where it has traditionally taken a conservative line. It has resisted attempts by the 11-member group to lift its production ceiling and recently called on OPEC members to strictly observe their production quotas to protect world prices.

Iran's policy of trying to curb growth in domestic petroleum consumption by gradually lifting heavy state price subsidies is also likely to continue under Khatami, who has warned that at current growth rates Iran's oil consumption will match production by 2011 or 2012.