French energy giant Total officially pulls out of Iran
August 21, 2018
France's Total had signed up last year to a $4.8 billion Iranian gas field project. However, it was forced to backtrack after the US threatened to impose penalties on any business found still doing business with Iran.
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Total, France's largest energy company, announced on Monday it was pulling out of a $4.8 billion (€4.1 billion) Iranian gas field project, after admitting it was extremely vulnerable to the threat of US penalties against those doing business with Iran.
The French group was one of three major energy companies set to help supply the state-of-the-art technology needed to tap into South Pars, the world's largest natural gas field shared by Iran and Qatar.
However, after abandoning the 2015 Iran nuclear accord in May this year, the United States has said it will reimpose sanctions on Iran in two phases, in August and November. The second round of sanctions will target the country's vital oil and gas sector. Any firm found doing business with Iran could risk facing serious US penalties.
US sanctions against Iran are back in effect
The first phase of US sanctions against Iran went back into effect in early August. Here's a breakdown of what the sanctions are targeting and how Iran has reacted to the measures.
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Sanctions signed off
US President Trump signed an executive order on August 5 aimed at piling financial pressure on Tehran to force a "comprehensive and lasting solution" to Iranian threats, including its development of missiles and regional "malign" activities. Trump warned that those who don't wind down their economic ties to Iran "risk severe consequences."
Image: Shealah Craighead
Where's the money?
The first phase, which took effect on August 7, targets the Islamic Republic's access to US banknotes, making transactions in a US-dollar dominated financial world difficult. A ban on Iran purchasing precious metals including gold further serves as an attempt to cut the country off from global markets.
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Planes, cars and carpets
Phase one also hits key industries including the purchase of commercial planes, cars and carpets. Iranian imports of graphite, aluminum, steel, coal, gold and some software are also affected. German automaker Daimler called off the production and sale of Mercedes-Benz trucks in Iran indefinitely after the sanctions came into force.
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Fuel to the fire
A second phase of sanctions — which is due to take effect on November 5 and will block Iran's oil sales — is due to cause more damage. Several countries, however, including China, India and Turkey have indicated they are not willing to entirely cut their Iranian energy purchases.
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'Psychological warfare'
Iranian President Hassan Rouhani said that the United States had launched "psychological warfare" against Iran to create division amongst its people. But he insisted that Iran still can rely on its allies China and Russia to keep its oil and banking sectors afloat. He has also demanded compensation for decades of American "intervention" in the Islamic Republic.
European Union foreign policy chief Federica Mogherini said the bloc is encouraging small and medium enterprises to increase their business with Iran. She said Tehran has been compliant with their nuclear-related commitments. The EU issued a "blocking statute" to protect European businesses from the impact of the sanctions.
"Total has notified the Iranian authorities of its withdrawal from the contract following the 60-day deadline for obtaining a potential waiver from the US authorities," the oil and gas giant said in a statement. "Despite the backing of the French and European authorities such a waiver could not have been obtained," it said.
The French energy giant had been due to invest an initial $1 billion into the 20-year gas field project, which it signed up to in July 2017 along with the state-owned China National Petroleum Corporation (CNPC) and Iran's Petropars. Total first announced in May that it was halting investment in the project, adding that it had spent less than €40 million to date, amid increasing uncertainty over US actions in the region.
Total also admitted it would be extremely vulnerable to US penalties; it has some $10 billion of capital employed in its US assets, while American banks are involved in 90 percent of its financing operations.
While US has threatened stiff sanctions on Western companies operating in Iran, the nuclear agreement's other parties — Britain, France, Germany, China and Russia — have vowed to stay true to the deal and urged businesses to follow their lead.
However, European firms have, understandably, opted to withdraw from Iran's weak economy rather than draw the ire of Washington and risk losing access to operations that require U.S. dollars.
US President Donald Trump's decision to walk away from the nuclear accord and reimpose sanctions has exacerbated Iran's economic woes. Its rial currency has lost almost half its value since April, leading to financing difficulties at local banks and heavy demand for US dollars among the population.
Trump has told Tehran that its only chance of avoiding sanctions would be to accept his offer to renegotiate a tougher nuclear deal. Iranian officials have repeatedly rebuffed that offer.
dm/jm (AFP, Reuters, AP)
Iran nuclear deal — treaty under threat
A year after Donald Trump pulled the US from the international nuclear accord with Iran, the Middle East nation announced it would no longer adhere to some "voluntary commitments" in the accord.
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The deal breaker
President Donald Trump announced on May 8, 2018 that he was pulling the United States out of the 2015 Iran nuclear deal, arguing that the international accord was not in America's "national interest." The decision threw a cloud of uncertainty over the future of the nuclear accord and raised tensions with US allies in Europe.
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Slap in the face
Britain, France and Germany lobbied the Trump administration and Congress to remain in the nuclear accord, arguing that the deal was working and a US violation without a follow up plan would be destabilizing. In European capitals, the Trump administration's withdrawal was viewed as a slap in the face of allies.
Image: Reuters/K. Lamarque
Iran scrap 'voluntary commitments'
A year to the day after Trump's announcement, Iran informed the other signatories of the accord that they would no longer adhere to certain "voluntary commitments." Iranian President Hassan Rouhani said the signatory nations had 60 days to implement promises to protect Iran's oil and banking sectors or Iran would resume the enrichment of uranium.
The decision came after the United States deployed an aircraft, the USS Lincoln, along with a bomber task force to the Middle East. Washington said the deployment was intended as a "clear unmistakable message." Iran said it took action because the European Union and others "did not have the power to resist US pressure."
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A triumph of diplomacy
The Joint Comprehensive Plan of Action (JCPOA), better known as the Iran nuclear deal, was signed in 2015 by United States, China, Russia, France, Germany and Britain (P5+1) and Iran following years of negotiations. Under the international agreement, Iran agreed to dismantle its nuclear program and be subject to monitoring in exchange for the lifting of international nuclear related sanctions.
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Compliance and verification
The JCPOA includes a robust monitoring, verification and inspection regime carried out by International Atomic Energy Agency (IAEA). The UN watch dog has verified Iran's compliance with the deal in 12 quarterly reports. The JCPOA allows Iran to pursue a peaceful nuclear program for commercial, medical and industrial purposes in line with international non-proliferation standards.
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Obama's achievement
The Iran nuclear deal was President Barack Obama's signature foreign policy achievement. Seeking to undo nearly every Obama administration legacy, Trump came into office calling it the "worst deal ever." The Trump administration argues the nuclear deal doesn't address other unrelated issues such as Iran's ballistic missiles, regional influence, support for "terrorist" groups and human rights.
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Iranians approved
The nuclear deal and lifting of punishing nuclear related international sanctions created optimism in Iran after years of economic isolation. However, even before Trump pulled the US out of the deal, Tehran blamed the US for holding back international investment and not fulfilling its end of the bargain due to the uncertainty created by Trump's threats.
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The opponents
After eight years with Barack Obama, Israeli Prime Minister Benjamin Netanyahu found the US president he wanted in Donald Trump. The Israeli leader repeatedly slammed the deal despite his own military and intelligence chiefs' assessment the that JCPOA, while not perfect, was working and should be maintained. Saudi Arabia and the UAE are the other main opponents of the nuclear deal.
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Who's left?
The EU-3 (Britain, France, Germany) have scrambled to ensure that Iran receives the economic benefits it was promised in order to avoid Tehran pulling out of the deal. As EU businesses face retaliation from the US for doing business with Iran, many are opting to avoid Iran. This would likely be a present to Chinese and Russian businesses.
