Conservatives have turned up the heat on the Iranian government's efforts to attract foreign firms into the oil industry amid political manoeuvring ahead of a key cabinet reshuffle expected next month, analysts say.

But they say the government could help deflate the recent row, which has included charges of corruption, by making so-called "buy-back" contracts with foreigners more transparent and working harder to explain the benefits of outside involvement.

Iran has signed deals worth billions of dollars since the late 1990s to develop oil and gas fields, attracting big names such as Anglo-Dutch firm Royal Dutch/Shell, Italy's ENI and France's TotalFinaElf.

The deals have courted controversy since the early days, raising old fears that the government's main source of revenue could fall back into the hands of foreign oil firms which were kicked out of the country after the 1979 Islamic revolution.

But the debate was once again stirred up after a senior hardline cleric, Ayatollah Ahmad Jannati, accused oil ministry officials of pocketing kickbacks. Several conservative newspapers have pounced on the issue, while one staunch conservative politician, Habibollah Askarowladi, has dubbed the affair "Petrogate."

Moderate President Mohammad Khatami, re-elected in a landslide last month and who is expected to announce a new cabinet in August, stepped in last week to defend the oil ministry, implying the charges could be politically motivated. But he also called for a thorough investigation into the allegations of corruption.

Analysts said the row was largely a reflection of the battle between reformers, buoyed by Khatami's re-election, and conservatives, trying to capitalise on the controversy after their election drubbing and ahead of the expected reshuffle.

Albrecht Frischenschlager, a director at Iranian firm Atieh Bahar Consulting, said much of the latest debate could be attributed to the political bickering, although old suspicions about the intentions of foreign firms also played a role. "Conservatives are on the look out for areas they can attack Khatami," he said.

Under buy-back terms, an investing firm recoups its capital expenditure and makes a profit by receiving payment from part of the project's output. The foreign firms act as "contractors", while the word "partner" is studiously avoided.

Such a formulation is used to skirt a constitutional ban on foreign ventures in the upstream energy sector, the source for about 80 percent of Iran's hard currency revenue.

The critics, mainly conservatives, say the foreign firms bring limited investment, little transfer of technology and few new jobs desperately needed for Iran's young population. Many are also worried about corruption, which analysts said pervaded much of economic life in Iran. They said the opaque nature of these contracts, prompted perhaps because of their political sensitivity, had only encouraged these worries.

"If the oil contracts are transparently reviewed by the parliament and the reviews published by the press...then the public opinion could judge the case," Askarowladi recently told the conservative Resalat newspaper, adding that this way any "ambiguity" could be cleared up.

Parliament this week launched a probe, expected to take up to six weeks, to determine whether the deals were beneficial to the country and whether Iranian firms could do the job. Yet, the criticisms by conservatives are echoed by some oil analysts, even though the analysts said Iran cannot do without foreign capital and technology to develop new fields and repair sites damaged during the war with Iraq in the 1980s.

"Of course, they have a point, which is that these contracts really aren't transparent," said Mehdi Varzi, senior energy consultant at Dresdner Kleinwort Wasserstein. "I think there is a clear case now for greater transparency and to explain to people what these contracts are and what benefits they bring to Iran."

Some Western oil experts said Iran was failing to reap all the benefits from foreign firms because of restrictions in the contracts, which penalise spending overruns and keep foreigners away from operating the sites once they have been developed.

They said this deterred the firms from introducing anything but tried-and-tested technology during development and meant they could do little to help maximise output once state-owned National Iranian Oil Co (NIOC) started operating a site.

A closer relationship could help boost recovery rates in Iran to 50 per cent or more of reserves, from current levels of about 25-35 per cent, the experts said.

Yet, NIOC companies and private Iranian firms are keen to secure more work in the oil business, confident they have the skills for the work. Analysts said this may have encouraged some to stir up the debate about foreign involvement further.

But, after years of isolation, the analysts said Iran lacked the ability to tackle the problems of an ageing industry. "I know the Iranian fields, I know the problems they face. The NIOC claims it can do the job. It can't," Dresdner's Varzi said.