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Total, one of France’s largest energy producers, has announced it will shut down its operations in Iran by November if sanctions imposed by the US are not waived.
Mega French energy company Total (NYSE:TOT) is preparing to back out of the billion-dollar gas project in Iran it announced last year amid confusion about US sanctions.
Total, one of France’s largest energy producers, has announced it will shut down its Iran-based operations by November of this year if sanctions imposed by the US are not waived.
The US first waived sanctions against Iran in late 2015 after brokering a deal that also involved the leaders of five EU nations and China. Under the agreement, Iran agreed to curb its uranium enrichment and cease its efforts to create a nuclear weapon.
For its cooperation, Iran was able to begin exporting its oil, gas and other resources on the world stage.
The deal, which has enjoyed cooperation from all parties since its inception, was called into question earlier this year by US President Donald Trump. The US leader gave the other signatories until May 12 to renegotiate the terms of the deal; however, the US ended up backing out prematurely.
The North American country then reimposed pre-2015 sanctions on Iran and threatened to instate steep tariffs on countries that continue to do business there.
The situation has left multinational companies with business in Iran in an unusual predicament — many companies like Total are preparing to abandon expensive projects out of fear the US will make exporting goods difficult, if not impossible.
Just last year, Total entered into a US$1-billion contract to develop phase 11 of the South Pars gas field in Iran, a deal it is now preparing to walk away from.
“Total will not be in a position to continue the SP11 project and will have to unwind all related operations before 4 November 2018 unless Total is granted a specific project waiver by the US authorities with the support of the French and European authorities,” the company stated in a press release.
“This project waiver should include protection of the company from any secondary sanction as per US legislation,” Total added.
Total isn’t the only company that is rethinking its business dealings in the Islamic country. German insurer Allianz and Danish tanker operator Maersk are also winding down their operations ahead of the impending sanctions.
In response to news that companies are preparing to exit the country, Iran’s oil minister, Bijan Zanganeh, has tried to appease the wary by saying Tehran will overcome pressure resulting from US withdrawal from the 2015 nuclear deal.
He went on to say, “the current situation will pass and Iran will emerge as a winner.”
Total’s share price remained steady this week despite reports it is backing out of the US$1-billion deal. Total closed at US$63.94 on Thursday (May 17).
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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.
