French major Total has warned it plans to withdraw from the South Pars 11 project in Iran if the U.S. and European authorities fail to grant it a "specific waiver".
The waiver that Total seeks would include protection from any secondary sanction per U.S. legislation, which would be crucial given the fact that Total relies on USA banks for almost 90% of its financing operations, and 30% of its shareholders are United States shareholders. The French company was the first Western firm to invest into Iran's energy sector after the 2015 nuclear deal.
But Total's announcement and similar ones by German insurance giant Allianz and Danish tanker giant Maersk earlier this week illustrate the major obstacles they face trying to overcome renewed USA sanctions on Iran.
Iran's energy ministry predicted previous year that the Total-led project would eventually produce tens of billions of dollars worth of gas products.
Total says that it has spent about 40 million euros developing the project to this point.
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. France, Germany and Britain are leading a European effort to safeguard Europe's economic interests in Iran.
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As a effect, "Complete is not going to be able to proceed the SP11 challenge and should unwind all related operations earlier than four November 2018 except Complete is granted a selected challenge waiver by the United States authorities with the assist of the French and European authorities", the French firm mentioned in a press release. "They have us by the throat because so much business is conducted and cleared in dollars", one European investment banker said.
Joe Kaeser, the CEO of Germany's Siemens, told CNN his company would not be able to do any new business with Tehran.
Zanganeh said that Total will not face any fine if it withdraws, but the investment it has so far made in the project will not be repaid until full implementation of the project.
Despite the US' withdrawal, the European Union said it would remain committed to the deal and would ensure sanctions on Iran remain lifted, as long as Tehran meets its commitments.
Total called for a waiver that would stipulate the company's protection from "any secondary sanction as per United States legislation". "With that in mind it's a logical decision", a European diplomat said of Total's decision.
The Phase 11 contract will automatically go to Total's consortium partner China National Petroleum Corporation (CNPC) and local player Petropars if the French player does pull out, Iranian officials have previously said.