French oil major Total said Wednesday it's not in a position to continue its $5 billion South Pars Phase 11 project offshore Iran, as it can not afford to be exposed to any secondary sanction, Kallanish Energy reports.
Complete began the South Pars 11 challenge in July 2017, two years after Western powers signed a nuclear take care of Tehran prompting the return of many companies to 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.
"On 8 May 2018, President Donald Trump announced the United States' decision to withdraw from the JCPOA (nuclear agreement) and to reinstate the USA sanctions that were in force before the JCPOA's implementation, subject to certain wind down periods", Total said in a statement. The European Union, also a signatory to the atomic deal, has pledged to take steps to salvage the accord.
Tehran has repeatedly hailed the Total project as a symbol of the nuclear accord's success at helping to revive and modernize Iran's critical oil and gas industry, which drives the country's economic growth and generates much of the government's revenues.
The oil major fears loss of financing in dollars by USA banks for its worldwide operations (U.S. banks are involved in more than 90% of Total's financing operations), the loss of its US shareholders (they represent more than 30% of shareholders) or the inability to continue its USA operations, with over $10 billion of capital employed in USA assets.
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US companies that export to China have seen their goods held up at China's ports amid tougher inspections. The prospect of a deal seemed to stem fears in soybean and other agricultural markets.
France, Germany and Britain are leading a European effort to safeguard Europe's economic interests but have few options that pose any threat to the United States. Officials in China and Russian Federation have indicated they will resist United States sanctions and capitalize on the void created if European companies withdraw from the Iranian market.
"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".
Italy's Eni (ENI.MI), which last June signed a provisional agreement with Tehran to conduct oil and gas feasibility studies, said after Washington's decision to quit the nuclear deal last week that it had no plans for new projects in Iran. "With that in mind it's a logical decision", a European diplomat said of Total's decision.
Denmark's Maersk Tankers, a major global shipping company whose oil tankers help carry Iran's oil exports to Asian markets, has also announced that it will wind down its business with Iran by November. The French company said it has spent less than 40 million euros ($47 million) on the project so far.
Iran's oil minister Bijan Zanganeh said on May 16 that Tehran would survive the renewed sanctions.
In an unintended twist, U.S. President Donald Trump's decision to threaten European companies that continue to invest in Iran may open the door to Chinese rivals.