The French oil and natural gas behemoth Total announced Wednesday that it is suspending further development of a major energy project in Iran, citing concerns about possible U.S. sanctions on companies that do business with Tehran.
The announcement follows President Donald Trump’s decision to withdraw from the Iran nuclear deal and re-impose economic sanctions against the Iranian regime. As a part of the withdrawal, Washington will also impose secondary penalties on foreign firms that do business with Iran’s energy sector. (RELATED: US Moves To Strangle Iranian Efforts To Secure Hundreds Of Millions Of Dollars To Fund Its Troubling Military Activities)
“Total has always been clear that it cannot afford to be exposed to any secondary sanction, which might include the loss of financing in dollars by US banks for its worldwide operations, the loss of its US shareholders, or the inability to continue its US operations,” the company said, noting that U.S. banks are involved in more than 90 percent of its financing operations and American entities make up more than 30 percent of its shareholders.
With roughly $250 billion in assets, Total is regarded as one of seven “supermajor” oil companies in the world. It signed a deal worth an estimated $2 billion in 2016 to develop Iran’s giant South Pars natural gas field. Its partners in the project are Iran’s Petropars and Chinese state oil company CNPC.
Total’s announcement illustrates the difficult decision that many overseas firms will face in light of Washington’s decision to re-impose sanctions on Tehran, which has become an in increasingly important trading with partner European countries. After the nuclear deal was implemented in 2015, European companies began to make significant investments in Iran, with trade reaching about $25 billion in 2017.
Trump’s decision means European companies that maintain business deals with Iran could be hit with secondary sanctions from Washington or shut out of international financial networks. The new reality has already soured relations between Washington and several European governments.
Richard Grenell, the newly confirmed U.S. ambassador to Germany, warned on May 9 that “German companies doing business in Iran should wind down operations immediately,” provoking outrage among German politicians and firms. France’s finance minister, Bruno LeMaire, criticized U.S. influence over other countries’ financial independence, saying that “the international reach of U.S. sanctions makes the U.S. the economic policeman of the planet, and that is not acceptable.”
Total said Wednesday that it is speaking with French and U.S. official about the possibility of a project waiver. The company added that it has so far spent less than $47 million on the South Pars project, and pulling out will not hurt its natural gas production targets.
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