- By Robbie GramerRobbie Gramer is a staff writer at Foreign Policy. He writes for The Cable, FP’s real-time take on all things, well, foreign policy. Before he joined FP in 2016, he used to think in a tank, managing the NATO portfolio at the Atlantic Council for three years. He’s a graduate of American University’s School of International Service, where he studied international relations and European affairs. He has lived in both Washington and Brussels, though he grew up in Idaho and Oregon, so he’s a West Coaster at heart. When he’s not busy reporting, he’s probably busy starting three new books before he has finished the last one or planning a trip to a national park he hasn’t visited yet.
In the middle of the U.S. presidential election Tuesday, Iran announced a $4.8 billion deal with French oil company Total SA — the first of its kind since the international community lifted economic sanctions on Iran in January as part of the nuclear deal. But the election victory by Donald Trump — who lambasted the Iran accord on the campaign trail and hinted he’d like to reimpose sanctions — may dissuade other energy companies from following Total’s path.
The Total deal, announced in preliminary form Tuesday, and expected to be formalized early next year, is not about jumpstarting Iranian oil production or increasing the OPEC nation’s ability to export more crude. Rather, it’s a way to finally develop the massive South Pars natural gas field to help meet booming Iranian demand for the clean-burning fuel. Total will team up with Iran’s Petropars and China’s CNPC on the project.
“I hope the international companies that are still hesitating to come to Iran will be encouraged to take the leap,” Iranian Oil Minister Bijan Zanganeh said after the deal, the Times of Israel reported Tuesday. Other Iranian officials said the country would sign another big deal with a European company in “two to three weeks.”
Iran has been trying to entice foreign investment in the energy patch all year, but it has proven a tough sell despite the country’s abundant reserves of oil and natural gas. The thicket of U.S. sanctions has made banks around the world leery of doing any business with Tehran, despite the easing of sanctions as part of the July, 2015 nuclear accord between Iran and Western powers.
Many of the country’s state entities that have spread their tendrils throughout the national economy are still under sanction. And the United States has kept severe sanctions on the Iranian Revolutionary Guard Corps, which is heavily involved in Iran’s energy sector. Though the U.S. Department of Treasury greenlighted investment in Iran’s energy sector for non-U.S. firms, American companies still haven’t received the okay.
Trump’s election threatens to nip Iran’s energy revival in the bud, and make it even harder for U.S. firms to elbow their way into a market desperate for Western capital and technology.
“With the election of Trump, it’s even less likely,” Matthew Reed, vice president at consultancy Foreign Reports, told Foreign Policy.
On the campaign trail, Trump excoriated the nuclear deal, and railed against relaxing sanctions on Tehran — something he could reverse in the White House. “Say goodbye to the Iran deal,” Richard Nephew, a former U.S. nuclear negotiator with Iran now at Columbia University, told Reuters on Wednesday.
A Trump administration could well reinstate some or all of the economic sanctions that would limit Western firms’ ability to do business there, Reed warned.
The Total deal is “the icebreaker ,but caution still rules the day,” he said. “I can’t say if it’s too late to derail the Total deal, but [Treasury] guidelines could change during a Trump administration, and new sanctions can’t be ruled out.”
Other Iran energy experts are more optimistic that more international firms will follow now that Total has shown the way, and that Trump’s victory won’t slam the door.
Since sanctions were relaxed, “many Western companies did ‘window shopping’ and showed interest in investing in Iran’s energy industry,” but no deals were signed until now, said Sara Vakhshouri, a veteran of the Iranian national oil company now at the Atlantic Council. Part of that was due to a global glut of oil and natural gas, which depressed interest in new projects, but it was still “discouraging” for Iran, she told FP.
But the Total deal indicates some ways to sidestep the sanctions thicket. Total is financing the deal in euros in part to avoid U.S. limitations on dollar transactions, she noted.
And Vakhshouri said the deal’s timing, at least from Tehran’s point of view, was an effort to send an unmistakable signal.
“By signing this deal with Total before the U.S. election is finalized, Iran eagerly sent a message to international investors that the result of the U.S. election could not have a significant impact on the nuclear deal and its energy industry,” she told Foreign Policy.
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