Confidential financial reports recently made public indicate that a 2001 gas export deal between Iran and UAE-based Crescent Petroleum has inflicted billions of dollars in losses on Iran, according to a report by Fars News Agency on March 3.

The controversial contract between the National Iranian Oil Co. (NIOC) and Crescent was set to supply gas to the United Arab Emirates for 25 years. However, allegations of corruption and underpriced gas sales led to the deal being shelved.

Successive Iranian governments took issue with the agreement, branding it as detrimental to national interests. However, several international arbitration courts ruled in favour of Crescent, putting Iran on course for a hefty compensation payout.

Fars described the Crescent deal as a “symbol of Iran’s failed energy diplomacy”, estimating the direct economic damage at a minimum of $4.2bn.

The report accused the NIOC of repeatedly modifying contract terms in Crescent’s favour, claiming that the state-owned company “failed to invoke its termination rights to renegotiate terms and instead appeased Crescent”.

A former Iranian Oil Ministry official, who spoke to Fars on condition of anonymity due to the sensitivity of the matter, claimed: “From the outset, Crescent acted as an international middleman. They bought Iran’s gas at dirt-cheap prices and sold it to the UAE at undisclosed rates. This was a never-ending losing game.”

Former Oil Minister Bijan Zanganeh, under whose tenure the deal was signed, had dismissed reports on the Crescent case as “exaggerated.”

Iran’s judiciary is investigating alleged misconduct related to the Crescent contract. However, no official rulings or findings have ever been made public.

The Fars report described the contract as a “strategic wound”, arguing that it hindered the development of one of Iran’s key gas fields due to technological reliance on Crescent.

Under the original agreement, Iran was set to export 14mn cubic metres of untreated gas daily from the Salman gas field, a shared reservoir with Abu Dhabi, to the UAE via an undersea pipeline in the Persian Gulf. The agreed price was $18 per 1,000 cubic metres.

The contract was halted in 2005 following objections from Iran’s Supreme Audit Court, which criticised the fixed gas price for the first seven years of the deal.