France’s Total Inks a Major Oil Deal with Iran

July 11, 2017

Rene Zou

TotalOil, cc Laurent Vincenti, modified, Wikicommons - https://commons.wikimedia.org/wiki/File:Laurent_Vincenti_Total.jpg

 

Summary

A consortium led by French energy giant Total signed a $5 billion oil deal with Iran to to further develop the country’s giant South Pars gas field. This is Iran’s first deal with a foreign energy company since sanctions were lifted in January 2016 following the Iran nuclear deal. Total began operating the offshore field in the 1990s, but had to pull out due to international sanctions imposed on Iran’s nuclear program in 2006; now that sanctions have been lifted, it’s ready to do business once again.

The oil deal is both substantive and symbolic. Total SA’s stake amounts to 50.1%, while China’s state-run China Petroleum Corporation (CNPC) owns 30%, and Petropas, a subsidiary of the National Iranian Oil Company, owns 19.9%. Total’s CEO Patrick Poyaunne is optimistic that the deal will encourage other companies to invest in and transact with Iran, further, indicating that “economic development is also a way of building peace.” In a quip directed at President Trump, he added, “We are here to build bridges, not walls.”

As US sanctions against Iran gradually lose their credibility and effectiveness, multinationals in Europe and Asia rush to strike deals with Iran. But political, economic and military implications for the country and region itself could be even broader. Trump’s backing of Iran’s regional rival, Saudi Arabia, the ongoing Qatar Crisis, and the fight against ISIS continue to ramp up regional instability.

 

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  • These deals may become moot should either the U.S. or UN act to impose new sanctions, especially any sanctions once again removing Iran from accessing the international wire transfer network or currency exchanges.

    All of which places any foreign entity in a precarious position should it decide to invest in Iran. A company also runs the risk being labelled a supporter of terrorism since the vast majority of revenue Iran generates from one of these deals would inevitably be used to fund its proxy wars and support its terrorist allies.

    his may mean that for the short-term at least, the “open for business” sign for Iran may be just another example of fake news.

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