Chapter Three: Institutions

Abstract

As described in the Chapter Two, natural gas is becoming increasingly more important than oil. The radical changes in the last 10 years have translated into critical market cycle developments with implications on gas pricing, natural gas contracts and on the way natural gas is traded globally. For Iran as the second largest conventional reserves holder, these developments do not only have a considerable economic impact but also a foreign policy (see Chapter on International Relations) and consequently domestic policy impact. As Iran’s political system is rentdriven and its oil production is declining, natural gas becomes increasingly important. To understand the domestic policy impact related to Iran’s natural gas sector, one needs to analyze the complex Iranian political system and how it affects the energy/natural gas market of Iran along with its policies and strategies. This is the scope of Chapter Three. The core of the chapter is the analysis of the formal and informal power structure of Iran. Based upon the power structure which changes over time – Iran’s energy policy is analyzed for the Presidencies of Rafsanjani, Khatami and Ahmadinejad.