Dubai (Platts)--27Jul2011/631 am EDT/1031 GMT

Iranian President Mahmoud Ahmadinejad Wednesday nominated Rostam Ghasemi, a commander in the powerful Islamic Revolutionary Guards Corps as oil minister, a controversial choice to head up the most strategic cabinet portfolio given that the ideological army is on an international blacklist.

"Rostam Ghasemi...is introduced for the oil ministry," Ahmadinejad said in a letter read out at a parliament session carried live on state radio. Three other ministers were also nominated.

Ghasemi, commander of the construction arm of the IRGC, the Khatam al-Anbiya headquarters, emerged as a late challenger to Mohammad Aliabadi, who has been caretaker oil minister since early June.

Should Ghasemi win parliamentary approval, the IRGC would be in effective control of the OPEC oil producing country's lifeline energy industry, cementing what some analysts say is the militarization of the Iranian government.

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Although Khatam al-Anbiya has a better track record than other local contractors in delivering projects, its status as pariah on the international scene is likely to complicate Iran's efforts to revive a sector plagued by delays and a shortage of cash, modern technology and manpower.

The US has had the IRGC and its affiliates on a blacklist for years and last June tightened these sanctions to include several branches of the elite force for what it said was their suspected involvement in nuclear proliferation activities. Ghasemi was among several IRGC officials included on the US Treasury's blacklist and whose assets were ordered frozen.

The European Union also bans dealings with the IRGC, its affiliates and officials, who are also subject to travel bans, which might make it difficult for Ghasemi to represent Iran, current holder of OPEC's rotating presidency, to attend OPEC meetings in Vienna.

The UN Security Council lists the IRGC, Khatam al Anbiya and dozens of companies owned or involved in related companies as state entities linked to proliferation activities. A UN resolution adopted last July ordered IRGC's assets frozen to prevent the powerful group from financing its projects.

Parliament Speaker Ali Larijani said a confirmation session would be held next Wednesday to debate the nominations of Ghasemi and three other ministerial posts amid early indications that Ghasemi was likely to win a vote of confidence after the influential parliamentary energy committee gave its blessing.

"I hereby announce, on behalf of the parliament's energy committee, that the committee's opinion about Rostam Ghasemi is positive and it approves his choice for this position," committee spokesman Emad Hosseini was quoted as saying by Fars news agency.

"Given his relevant background in oil and gas sectors and mastering many projects including the South Pars field as well as other oil projects, and given the fact that he has been in charge of many projects in this industry, it is very much likely that the parliament approves him as oil minister," he added.

Hosseini said Ghasemi had submitted his plans for the energy industry to the committee. "In the past few days, the committee has seriously studied his plans and we were waiting for his nomination to announce our views."

Iranian news websites said earlier this week that Ghasemi's nomination was agreed last Thursday after conditions he set for accepting the job were accepted, among them the right to name his own deputy oil minister. Reports surfaced on Wednesday that Aliabadi, who is an Ahmadinejad ally, may be named deputy oil minister.

The president's office, however, issued a denial Wednesday saying there were no conditions attached to Ghasemi's nomination.

Ghasemi said after his nomination was made public that he had submitted a policy paper outlining his plans for the energy sector.

"After gaining a vote of confidence from parliament, I will use Khatam al-Anbiya Headquarters alongside other contractors," he told semi-official news agency Fars.

Ghasemi, who holds the rank of Brigadier General, said his plans for the energy industry include "maintenance of sustainable production from oil fields, more exploitation from shared fields, collection of associated gas and boosting investment in the oil industry," adding that he had submitted his agenda to parliament.

The IRGC and its affiliates have grown into an economic power in Iran, largely as a result of the sanctions, imposed by the international community over suspicions that Tehran is secretly developing nuclear weapons, a charge the Iranians deny.

The involvement of IRGC or its subsidiaries would make it difficult to source parts and equipment from foreign companies, which run the risk of being in breach of the sanctions should they have to deal with Khatam al-Anbiya or any other banned entity.

Khatam al-Anbiya expanded its presence in the mainstay energy sector after foreign oil companies pulled out because of the sanctions. Initially established shortly after the Islamic Revolution of 1979 as guardians of the clerical establishment answering to the Supreme Leader, the IRGC and dozens of its branches have expanded their influence beyond their original mandate and are involved in virtually every sector of the Iranian economy.

Iran is the second biggest oil producer in OPEC with current production estimated at 3.7 million b/d, though many of its older oil fields suffer from a lack of investment due to sanctions and are in decline while the country consumes nearly all the gas that it produces.

--Staff, newsdesk@platts.com