French Oil Firm May Leave Iran

French Oil Firm May Leave Iran

French Oil Firm May Leave Iran

Total said it will pull out of a billion-dollar project to develop Iran's huge South Pars natural gas field by November 4 unless it can secure a exemption from the renewed sanctions imposed as a result of President Donald Trump's decision with withdraw from the nuclear deal.

"Total has always been clear that it can not afford to be exposed to any secondary sanction, which might include the loss of financing in dollars by United States banks for its worldwide operations, the loss of its U.S. shareholders or the inability to continue its USA operations", they said.

On May 8 President Donald Trump announced his decision to withdraw the U.S. from the Iran nuclear deal, also pledging to reinstate the anti-Iranian sanctions that were lifted as a result of the agreement.

German insurer Allianz and Danish tanker operator Maersk are also winding down their business in Iran. So the French energy giant won't commit any more funds to Iran's South Pars 11 project, in which it took a controlling stake past year.

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

Other European companies including Volkswagen and Airbus have forged business ties with Iran since the breakthrough 2015 deal was signed.

Last week, The US announced re-imposing strict sanctions on Iran, which were lifted in 2016 under the nuclear deal reached between Tehran and the six world powers.

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"Total will not be in a position to continue the SP11 project and will have to unwind all related operations before November 4, 2018 unless Total is granted a specific project waiver by the United States authorities with the support of the French and European authorities", the statement said. The company has a few options if they leave.

"The issue is that Iranian transactions can't be processed though any part of the banking system that needs access to the USA dollar", Gammel said. 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.

French energy giant Total joined other European companies in signaling on Wednesday they could exit Iran, casting doubt on whether European leaders meeting to try to salvage the Iran nuclear deal can safeguard trade with Tehran.

The company added that it will not be able to continue operations unless it is given a project waiver by USA authorities, with the support of French and European authorities.

"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". "The EU can't compel or really protect the private sector", Sanam Vakil, associate fellow at Chatham House said of Total's announcement. 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.

Industry sources told Reuters this week that China's CNPC, which holds a 30 percent stake in the South Pars project, was ready to take over Total's majority stake in the project if it pulled out.

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