Courtesy of the Wall Street Journal, an interesting report on Iran’s Revolutionary Guards’ Engineering Contractor Khatam ol-Anbia:

As relations continue to thaw between the West and Iran, Tehran hopes to lure major oil companies back to invest in its all-important energy sector.

But any oil firms that return to Iran will find a new force to be reckoned with: the Iranian Revolutionary Guard Corps, set up in 1979 by Ayatollah Ruhollah Khomeini to protect the country’s Islamic political system.

In particular, oil companies will find it necessary to come to an accommodation with engineering contractor Khatam ol-Anbia, which is owned by the guards and whose name means “Seal of the Prophets.”

Khatam was set up in 1989 following Iran’s war with Iraq to provide employment for guards and use skills developed in the conflict, such as building roads and bridges. With up to 40,000 employees, according to U.S. government estimates, the company has become one of Iran’s largest conglomerates, building everything from ports to highways.

The Revolutionary Guards had only a small presence in the sector when big Western oil companies such as France’s Total SA FP.FR -0.73% and Royal Dutch Shell RDSB.LN +0.29% PLC signed oil deals with Iran in the late 1990s.

After 2005, though, then-President Mahmoud Ahmadinejad signed billions of dollars in contracts with companies controlled by the guards, particularly in the oil-and-gas sector. His aim was to prop up the most conservative elements in the regime to foster support for his hard-line stance on Iran’s nuclear program.

Khatam is one of those companies. Its influence in the oil-and-gas sector grew rapidly starting in 2010, when the last Western oil companies pulled out of Iran as economic sanctions against the country tightened.

Although sanctions on Iran have been eased for the first six months of this year, U.S. and European Union companies still are barred from dealing with Khatam, which the U.S. has accused of being involved in Iran’s nuclear program. If that ban remains after other sanctions are permanently lifted, that could prove an impediment to Western companies’ plans to return.

“An oil major partnering with Khatam? I can’t see that happening,” said a former executive at a European oil company that had pulled out of Iran.

Hassan Dargahi, Khatam’s managing director for oil and gas, said the company has more than $50 billion in contracts with the Iranian government.

After Total and Spain’s Repsol SA REP.MC -0.63% exited the giant South Pars gas field in the Persian Gulf in 2010, companies controlled by Khatam were awarded a large part of $21 billion in contracts for drilling, pipeline and platform construction, said Pars Oil and Gas Co., the company that oversees the field. Khatam has also received billions of dollars in contracts to build a refinery, petrochemical plants and pipelines.

Khatam is in talks to secure $5 billion of contracts from the government in areas such as petrochemicals and liquefied natural gas facilities, Mr. Dargahi said.

Wearing Khatam’s corporate uniform of a blue-gray suit and sporting the trademark stubble of conservative Iranians, Mr. Dargahi said his company hadn’t benefited from political favoritism during heavy sanctions. “The contracts were all awarded through tenders,” he said.

Still, since Hasan Rouhani became Iran’s president in August 2013, there has been some pushback against companies such as Khatam. Under Mr. Rouhani, who is widely seen as a moderating political figure, Iranian officials have criticized guards-controlled companies for alleged mismanagement and delayed projects.

At a recent trade fair in Tehran, Oil Minister Bijan Zanganeh criticized contractors in Iran’s oil sector, though he didn’t name specific companies. “I’m not afraid of the hue and cry created by [rent seekers] and God willing, I will stand against them,” he told global oil-industry executives. Experts in oil-dependent economies generally use the term rent seekers to characterize people and companies who use political protection to overcharge for their services.

Privately, Iranian oil officials frequently criticize Khatam’s lack of experience in handling projects in oil and gas fields. In one instance, insufficient coating on a gas-condensates tank led to leaks, interrupting plans to produce 80,000 barrels a day at South Pars, Iranian officials and contractors involved in the matter said.

“In all large projects, there are some setbacks such as corrosion,” Khatam’s Mr. Dargahi said. “We have solved these problems.”

State-owned National Iranian Gas Co. recently canceled a contract for Khatam to help build a $1.3 billion pipeline exporting natural gas to Iraq, citing delays and Khatam’s financing problems.

“We are talking to companies to give it to someone other than Khatam ol-Anbia,” said Hamid-Reza Araqi, National Iranian Gas’s managing director. He said he was in talks with three foreign companies over the contract.

Khatam’s Mr. Dargahi said the canceled contract was “not that big, and unprofitable.”

Khatam doesn’t seem to have fallen far out of favor. At the trade fair, Khatam’s booth was opposite that of the National Iranian Oil Co., the country’s main state-owned oil company.

Khatam also is preparing for the reappearance of Western oil companies—albeit idiosyncratically. Its English-language brochure promises “to harness the potential…of investors” and perform “Jihadi management,” an expression coined by Iranian Supreme Leader Ali Khamenei to promote a religious element in running companies.

Not all foreign oil executives are worried about dealing with Khatam. At the company’s trade-fair booth, Wolfram Schöne, managing director of German engineering firm AviComp Controls GmbH, touted his company’s ability to refurbish gas compressors.

Khatam executives “already know about us,” Mr. Schöne said. “If they are not under sanctions, we will sell to them.”

——–

Revolutionary Roads

The Revolutionary Guards’ economic role expanded from infrastructure to the oil sector after the election of president Mahmoud Ahmadinejad in 2005.

A list of some of the Guards’ largest contracts:

Before Ahmadinejad:

• 1991: Highway to South of Tehran (value unknown)
• 2002: Dam and hydroelectric power plant in South West Iran* ($310 million)

After Ahmadinejad:

• 2006: Metro line in Tehran ($4 billion)
• 2006: Two phases of the South Pars gas field ($2.1 billion)
• 2006: Gas pipeline contract in South-Eastern Iran ($1.3 billion)
• 2007: Oil-products storage tanks in Persian Gulf port * ($340 million)
• 2009: Railway network in southeastern Iran ($2.5 billion)
• 2010: Contracts in five development phases of the South Pars gas field* ($21 billion)

Non-exhaustive list

*As part of a consortium

Sources: Khatam al-Anbia, National Iranian Oil Refining & Distribution Co., Iranian state media