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Iran to seek foreign investment in Caspian energy

By Mehrdad Balali

TEHRAN, May 10 (Reuters) - Iran 's parliament passed a law on Wednesday allowing the government to seek foreign investment to develop the keenly sought after energy riches of the Caspian Sea.

The ruling limited the opening to buy-back deals, under which a foreign company recoups its investments through a share of a project's oil or gas production.

Iran has already secured a series of buy-back deals with foreign companies for energy projects in the Gulf.

The new bill, pushed through by the oil ministry, won overwhelming support from deputies amid growing concern that Iran may be falling behind its northern neighbours in developing the Caspian , seen as a new oil frontier with large potential.

The bill still needs approval by the powerful Guardian Council, which vets parliamentary legislation, before becoming law.

Iran has so far sat on the fringes of an international race to develop the Caspian because of U.S. sanctions prohibiting virtually all trade with the Islamic republic.

Other littoral states have attracted huge investments by Western consortiums to develop their Caspian resources.

Largely left out of the race, Tehran has argued for a halt to development of the sea's resources until a legal regime is agreed.

But the other littoral states have said every country should be free to develop its own area of the Caspian .

Iran shares the closed sea with Russia and the former Soviet republics of Kazakhstan, Turkmenistan and Azerbaijan.

The sea's last comprehensive legal regime was signed in the 1940s between Iran and the Soviet Union. But the 1991 collapse of the communist state rendered the framework null and void.


Mohsen Yahyavi, a member of parliament's oil commission, said the bill was in Iran 's best interest.

"Because of the lack of a legal regime and to assert our sovereignty in light of the unjust exploitation of the Caspian Sea's resources, we have allowed deals based on the buy-back programme," he said during a debate broadcast on state radio.

"Our rivals are making the most out of the Caspian resources. We seek deals with foreign partners to develop our 20 percent share of the sea," he said.

Iran has been so far bypassed as a route to carry Caspian oil to world markets, mainly due to U.S. pressure, despite Tehran's repeated arguments that Iran is the most economically viable route for a pipeline.

The United States, which wants to isolate Iran for its alleged support of terrorism, has fiercely opposed any Caspian route through the Islamic state.

Washington says such a pipeline would give Iran undue control over the flow of vital oil suplies to the West.

But Tehran has been in talks with Kazakhstan to build a pipeline to ship Kazakh oil to the Gulf under a swap deal.



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