Total SA has announced it will not go ahead with its South Pars Gas Project (SP11) unless it is granted a specific project waiver by the United States, along with support of the French and European authorities, The French major said in a Wednesday press release.
Continuing to do business in Iran would be too great a risk as the company has large operations in the USA and depends on the country's banks for financing its operations, Total (tot) said in a statement Wednesday. Zanganeh noted that the country will definitely overcome the difficulties that result from the United States withdrawal from the 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.
South Pars phase 11 development is aimed initially at domestic gas demand.
EU leaders at a summit in the Bulgarian capital of Sofia late on May 16 reaffirmed their commitment to trying to keep the landmark 2015 agreement alive and protecting European companies doing business in Iran.
Sunk costs for Total as relates to its 50.1 percent stake in the project amount to roughly 40 million euros, according to its press release, but previous reports are that Total has sunk about $90 million into South Pars.
U.S. President Donald Trump said last week he intends to pull out of an worldwide accord curbing Iran's nuclear program. Joe Kaesar, the CEO of Germany's Siemens, told CNN his company would not be able to do any new business with Tehran.
"Total will not be in a position to continue the SP11 project and will have to unwind all related operations before November 4, 2018 unless Total is granted a specific project waiver by the USA authorities with the support of the French and European authorities", the statement said. Total does about 30 percent of its business through the U.S. banking system.
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"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".
Germany, France and the United Kingdom have vowed to stick with the nuclear deal and they're talking to Iranian officials about how to protect the economic benefits it offered Tehran.
An official in the French finance ministry said "precise requests" were being lodged with the USA authorities, including for Total, and that the company's decision was not a surprise.
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.
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Total called for a waiver that would stipulate the company's protection from "any secondary sanction as per USA legislation".
The total project, which also involves China 's CNPC and Iranian company Petropars, is estimated to be around $2 billion for the first phase.
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