France's Total to quit Iran gas project if no sanctions waiver

Alicia Cross
May 17, 2018

Total said it might quit a multi-billion-dollar gas project if it could not secure a waiver from U.S. sanctions.

Total said it will unwind operations by November unless sanctions are waived.

Iran has said it may start enriching uranium again if it can no longer see any economic benefit from sticking to the deal, which lifted earlier worldwide sanctions on the Islamic Republic in exchange for it curbing its nuclear ambitions.

Italy's Eni, which last June signed a provisional agreement with Tehran to conduct oil and gas feasibility studies, said after Washington's decision to quit the nuclear deal last week that it had no plans for new projects in Iran.

Zanganeh's statement came after the French energy giant said that is preparing to pull out of the gas project in the face of renewed United States sanctions.

"The risks of being on the wrong side of the USA government are not worth the benefits of trading with Iran once the sanctions are in place", said Jason Gammel, a London-based analyst at Jefferies LLC.

Tehran has repeatedly hailed the Total project as a symbol of the nuclear accord's success at helping to revive and modernize Iran's critical oil and gas industry, which drives the country's economic growth and generates much of the government's revenues.

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LONDON-European firms have started pulling back investment and abandoning commitments in Iran, responding to a decision last week to reimpose broad American sanctions on Tehran by year end.

Total said the South Pars project puts at risk the company's large operations in the United States and reliance on USA banks for financing of 90 percent of its operations. The company has a few options if they leave.

For the French company to stay, a project waiver would have to protect the company from "any secondary sanction as per U.S. legislation", it said.

"The fines are in the multibillions these days so it's just not worth the risk for a small piece of business and maybe pleasing a (European) government". Joe Kaeser, the CEO of Germany's Siemens (SIEGn.DE), told CNN his company would not be able to do any new business with Tehran.

Germany, France and the United Kingdom have vowed to stick with the nuclear deal and they're talking to Iranian officials about how to protect the economic benefits it offered Tehran. "The EU can't compel or really protect the private sector", Sanam Vakil, associate fellow at Chatham House said of Total's announcement.

These renewed sanctions imposed by President Trump have left some major European companies in a quandary as to what to do with their business operations.

"This project waiver should include protection of the company from any secondary sanction as per United States legislation". Total has a 50.1 percent stake in the project that develops phase 11 of the South Pars, while China has 30 percent with the remaining shares belonging to Iranian national oil company subsidiary PetroPars.

Other reports by Free-Prsite

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