Since many of the Western sanctions on Iran were lifted early last year, Tehran has been trying to restore its crude oil exports to a pre-sanction level and attract foreign investments in its energy sector.
Although some companies are still cautious and not rushing into deals with Iran, many European, Russian, and Asian firms have signed agreements or letters of intent with Iran that would turn into billions of dollars of investments.
The pledged and potential investments could help Iran cushion the impact of any move by US President Donald Trump to end the nuclear deal with Iran that the US had agreed together with China, France, Germany, Russia, and the UK.
While the US has imposed new sanctions on Iranian figures and President Trump has signed into law an act imposing new sanctions on Iran, some of the biggest European and Chinese oil companies have walked into preliminary deals with Iran’s energy sector.
If the US does step up sanctions or if it were to revisit the nuclear deal, Iran has a cushion of the investments from companies from France, China, Russia, the UK, and Germany.
These countries are crucial to the nuclear accord, and their companies have signaled they want the access to Iran’s market open, according to experts who talked to Bloomberg earlier this week.
“There is pressure coming from the business establishment in these countries to maintain access to the Iranian market,” Sanam Vakil, an associate fellow at Chatham House’s Middle East & North Africa Program in London, told Bloomberg. Many of those governments “recognize that marginalizing and isolating Iran is not in their interest”, Vakil noted.
Iran aims to sign US$50 billion-US$60 billion worth of oil and gas contracts by March 20, 2018 — the end of the current Iranian year, its Oil Minister Bijan Zanganeh said last weekend, as reported by Iran’s Tasnim News Agency.
Last month, France’s energy major Total signed a contract to develop phase 11 of the South Pars Gas Field in Iran — the world’s biggest gas field — marking the first Iranian Petroleum Contract (IPC) with a Western major since most sanctions on Iran were lifted. Total has 50.1 percent and Chinese state-owned oil and gas company CNPC owns another 30 percent of the project worth a total of US$5 billion in investments.
Apart from Total’s deal, other European companies have signed provisional agreements to explore the potential of various Iranian oil and gas fields. According to Iran’s Oil Ministry news service, Shell, Total, Petronas, and Inpex have submitted studies for the potential development of Iran’s biggest oilfield Azadegan, which Tehran claims has 37 billion barrels of oil and which is shared with neighboring Iraq.
Italy’s oil and gas major Eni signed last month a memorandum of understanding with the National Iranian Oil Company (NIOC) to explore a potential investment in the Kish gas field in the Persian Gulf and the third phase of development of the Darkhovein oilfield.
Earlier this month, Shell submitted to Iran the results of its feasibility studies for the potential development of the South Azadegan and Yadavaran oilfields.
From Asia, South Korea’s SK Engineering and Construction has signed a US$1.6-billion deal to revamp Tabriz Oil Refining Company’s 110,000-bpd refinery northwest of Tehran.
Last week, Turkish energy company Unit International, Russia’s Zarubezhneft, and Iran’s non-governmental firm Ghadir Investment Company pledged to invest a combined US$7 billion to drill at three oil fields and one natural gas field in Iran.
Iran has also signed deals with European firms in sectors other than energy.
Two of the biggest European carmakers, France’s Renault and Germany’s Volkswagen, are also committing presence and investments in Iran. In the past two months, Renault set up a joint venture, while Volkswagen said it was returning to the Iranian market after more than 17 years.
While the US is stepping up Iran sanctions, Europe, Russia, and Asia are signing agreements to invest in Iran’s energy and industry. This could provide Tehran with a buffer if the US further ramps up sanctions.