PIN: The question of buy-back contracts, its ensuing problems and the need to improve them have already been raised. What can be done to solve these problems? Dr. Ghanimifar: Portfolio reform is used in various fields such as risk portfolio, stocks portfolio, investment portfolio, management portfolio and so on, and all are aimed at diversifying every and each of them. Diversification of financial resources can begin with direct borrowing or finance or attraction of investment. Some of these cases are not possible due to their contradiction with the Iranian law. For instance, Article 81 of the Iranian Constitution stipulates that no concession should be granted in any industrial branch. The same holds true for some other regulations which have been approved by lawmakers on the basis of the country's national interests. However, based on the Law on the Fourth Five Year Economic Development Plan, it seems that if an approval whose by-law has been confirmed by the government is verified, in case of some issues which are not in contradiction with the constitution but needs some amendments to some parts of previous regulations, perhaps some kind of investments can be accepted. PIN: Doesn't this mean that we should go towards contracts based on partnership in production? Dr. Ghanimifar: Under the present circumstances when we are authorized to enter into partnership in production in the southern section of the Caspian Sea it seems logical that in regions where there are rich oil and gas reserves we should not divide our reserves with investors in order to compensate our lack of capitals or technological limitations but we should do so in those regions where oil and gas reserves are limited because this will entail no risk for us if we and our foreign partners do not reach any oil or gas reserves. PIN: Are there other financing methods? Dr. Ghanimifar: As for financing a project there are schemes such as BOT (Build, Operate and Transfer) which can be signed with a single foreign company or a combination of foreign and domestic firms. Another scheme is BOOT under which the ownership is not in the hands of the government for a while but when operations are completed the ownership will be returned to the government. These are among the points for which no specific planning has been made given the huge investments made in the oil sector. Other points include issuance of bonds for a particular project either in the upstream or downstream sectors. Therefore a combination of these schemes can be used to maximize the country's profits. One of these is buy-back scheme which given the experiences the country has acquired in the past can be improved to ensure more benefits for the Iranian party. PIN: The dissatisfaction of the foreign party with our contracts on the one hand and the need to make more profits for Iran in the contacts on the other are two important issues in this respect. What is the solution? Dr. Ghanimifar: The buy-back contracts have a forty-year background. Buy-back is a kind of contract inked with contractors. Under normal contracts, when a project is entrusted to a domestic or foreign contractor, based on the existing regulations the contractor should be paid in cash before or during the implementation of the project. But under buy-back contracts, a contractor will be entitled to be paid only when he completes the project according to the terms of the contract. In other words, based on our present buy-back contracts, the contractors are allowed to recover their investments from a percentage of the sale of products. Choosing one of the numerous financing methods can raise this question that why other methods have not been used. Making any amendment that needs to be made in a buy-back contract can undoubtedly turn it into another financing method. Reforming some articles of this kind of contracts should be carried out in such a way as to guarantee the maximum interests of the country. However, in any contract signed either with a foreign or domestic party or a combination of them, we should take into consideration the fact that a contract can be inked properly and produce the desired results only when it secures logical profits for both parties. No contact can last long if it secures the interests of only one party. Taking into consideration the interests of both parties to a contract can protect oil fields and reserves from any damage on the one hand and on the other, would allow the guest company to enter the country with its capital and technology and transfer them. PIN: A number of experts reiterate that under buy-back contracts, the contractors make their planning in such a way as to ensure that upon delivery of the project there will be enough production but the production level may then fall and cause damage to the reserves. How can this be solved? Dr. Ghanimifar: If the said contractor plays a supervisory role during the operations and after delivering the project, such a supervision can improve possible weak points of the contract in favor of Iran and as a result, damage will be minimized or reduced to a level acceptable to both sides. PIN: In order to safeguard the reserves, is it necessary for Iranian experts to be present in all stages? Dr. Ghanimifar: Of course, safeguarding the reserves means safeguarding the national wealth and is a very subtle issue. In some cases given the long background of the oil industry in Iran and its access to sufficient expertise, our experts are expected to do such a job and they too have proved to be able to do so. There was a time when new fields were different from previous fields in terms of structure and this required new facilities to protect their reserves. No doubt that transfer of technological know-how is not something odd for everybody willing to keep himself or herself up to date. In that case, in my opinion such a protection will reach a favorable level only when the transfer of technological know-how to Iran is facilitated to an extent that in a short of period of time up to date experts can be used in those new fields whose structure is different from the others. At any rate, the task of managing the national wealth should be in the hand of domestic experts. If we failed to keep pace with the modern technology of the world at certain periods of the post-revolution era for any reasons such as lack of necessary capabilities, we should now train our forces first so as to pave the way for keeping ourselves up to date. PIN: Some people propose that we should no longer ink buy-back contracts and instead provide financial resources needed for implementation of a project through finance method. This is while in finance method we are facing the guarantee to be given by the government. What is your opinion in this regard? Dr. Ghanimifar: It depends on how you finance a project. If it is a kind of finance which according to the law needs to be guaranteed by the central bank of the treasury system, in turn, we receive a certain amount of money for a project or certain projects and we have to put the incomes and assets of the government as guarantee. But this does not hold true for a large number of contracts or perhaps when you receive a loan to finance a project, you may give the guarantee of the said company or in other words, you guarantee the said company from the series of state-owned firms using the national wealth. PIN: How has been finance scheme in the oil sector? Dr. Ghanimifar: In financing big oil projects, the National Iranian Oil Company is itself the guaranteeing party and in using such a finance method, it is better not to make the government and its treasury face the foreign party because otherwise in the event of any trivial problem and any dispute which needs to be solved through courts of justice, the foreign party can stake a claim to the assets of the Iranian government. PIN: Has there been any finance-based project involving the government as its guarantor? Dr. Ghanimifar: Yes. It has been true with other organization. Both the law and lawmakers has allowed a ministry or a state-owned company to receive finance in exchange for a guarantee to be given by the treasury for its repayment. PIN: Will the whole production process be put at our disposal after a contract is signed? Dr. Ghanimifar: Under present conditions, when the implementation of a project is completed or in other words after construction is finished during the time stipulated in the contract or when on certain days when the production reaches a level specified in the contract, the relevant contractor will deliver it to the Iranian party without any problems and afterwards, the NIOC will enter the process of production. For instance, Sirri, Sorush and Noruz oil fields have been developed under such contracts and they were delivered to the NIOC when their development projects were completed. PIN: Is technological know-how transferred to Iran under buy-back contracts? Dr. Ghanimifar: One of the points which has already been taken into consideration in such contracts was transfer of technology to the country. That to what extent this has been successful is a question that should be answered by the technical section. But as for repayment of buy-back contracts, when a joint managerial committee representing both parties namely the NIOC and its foreign partner specifies the time for repayment of loan under installment scheme, then we can sell crude oil and its derivatives such as gas condensates to the contractor at international prices or if the contractor would not like to buy the products at international prices or offer lower prices, we can sell them at international prices and pay our installments in cash. Therefore, only in the international trade sector we can say whether international data has been transferred to Iran or not. Of course, as far as international trade sector is concerned we have tried to take into consideration the latest international date in this respect and in some cases we have made some amendments to the contracts to secure more benefits for the country.