Published: Thu, May 17, 2018
Business | By Kate Woods

Iran gasfield proves too hot to handle for Total

Iran gasfield proves too hot to handle for Total

Last week, President Donald Trump withdrew the United States from the Iran nuclear agreement.

Total signed a contract in 2017 to develop phase 11 of Iran's South Pars gas field, with an initial planned investment of $1bn (£750m).

In announcing his withdrawal from the deal, Trump warned companies that they face sanctions if they do business with Iran.

In addition, U.S. shareholders represent more than 30% of Total's shareholding, and the company's USA operations represent more than $10 billion dollars of capital employed.

Following the global agreement three years ago to ease the embargo against Iran, companies began exploring trade and investment with the former isolated state.

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However, officials with the company state that they will have to walk away from the project if they are not exempted from the new U.S. sanctions.

Washington is re-imposing strict sanctions on Iran, which were lifted under the 2015 deal to curb the country's nuclear ambitions.

France, Germany and Britain are leading a European effort to safeguard Europe's economic interests in Iran.

"It would be suicide to do any new business or funding for Iran or Iran-related companies without explicit guarantees from the USA government".

It said it had so far spent less than 40 million euros ($47 million) on the project and that pulling out would not impact the company's production growth targets.

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"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". Upon withdrawing from the agreement, President Trump stated that he will once again impose sanctions on Iran, and companies that wish to do business utilizing the U.S. banking system will be sanctioned if they continue to do business with Iran after a period of 90 days.

Total's announcement comes after Denmark's Maersk, which operates oil tankers globally, said it would fulfil commitments in Iran already on its books but would not enter into any new contracts.

Joe Kaeser, the CEO of Germany's Siemens, told CNN his company would not be able to do any new business with Tehran. "With that in mind it's a logical decision", a European diplomat said of Total's decision.

Iran's oil minister Bijan Zanganeh said on Wednesday, that Tehran would overcome pressures resulting from the United States' withdrawal from the nuclear deal.

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