What's Really Behind French Oil Giant's Deal With Iran?
Iranian President Hassan Rouhani welcomes chairman and CEO of France's Total SA Patrick Pouyanne for their meeting at his office in Tehran, Iran, Monday, July 3, 2017. (Iranian Presidency Office via AP)
Thursday, 27 Jul 2017 01:06 PM
The $4.8-billion-dollar deal between Iran and France's Total, the huge multinational oil and gas company, has become very controversial. Considering the unilateral U.S. sanctions and increasing measures against Iran, why has Total risked signing such a deal?
There are a variety of possibilities
.
Total will be developing phase 11 of Iran's mammoth South Pars gas field, the largest in the world, along with a state Chinese firm and an Iranian subsidiary. The project is set to render 2 billion cubic feet of gas per day, equivalent to 400,000 barrels of oil.
Iran's domestic market will receive the supply in 2021. The first stage is set to cost $2 billion, with an end price of up to $5 billion and production forecasted to start within 40 months.
As we speak, however, Washington continues to impose sanctions on Tehran and the Trump administration's comprehensive Iran policy has yet to be defined. Therefore, why did Total accept such a risk?
The mullahs' regime has provided numerous concessions in this deal, leaving Total believing the risk is worth taking. Iran also may receive no compensation in the case of Total deciding to abandon the contract. Ten years ago a similar contract was signed between Iran and Total, ending in the French company pulling out and not paying a dime in compensation.
Total most likely also received guarantees on Tehran paying any possible financial fines. And finally, considering the silence seen from Washington over this deal, there lies a possibility of the Americans providing a green light for its brokering.
Needless to say, U.S. Treasury Secretary Steven Mnuchin has emphasized that regardless of the policies adopted by Congress, the Trump administration will continue its own path of implementing sanctions on Iran.
The entire contract remains classified and the scenarios discussed above remain probabilities. What remains completely constant is the enormous scope of concessions provided by Iran. Rest assured all such actions were approved by Iranian Supreme Leader Ali Khamenei himself.
This is exactly why he has remained silent despite all the disagreements and discussions inside the regime. Iran's parliament has canceled any and all discussions in this regard. When handling major policy matters, Khamenei has the final word, similar to how it is said he blessed the Iran nuclear deal in a mere 20 minutes.
Both Iranian regime factions need to launch a major brouhaha in this regard. Members of Khamenei's conservative faction refer to the faults in slamming the faction loyal to President Hassan Rouhani.
The Revolutionary Guards (IRGC) is the main party concerned in this regard, as the Total deal leaves it out of earning any direct revenue. The Rouhani faction also seeks to boast their success, especially after gaining nothing from the Iran nuclear deal.
Economically, this $4.8 billion deal only provides for 2.5 percent of Tehran's investment needs. In the next five years, Iran will need around $200 billion in investments, according to the Oil Ministry. This deal provides for the only 1/40th of the amount.
Iran will drop from an oil exporter to becoming an oil importer if around $150 to $200 billion foreign investing are not realized in the next decade, according to the Iranian Parliamentary Research Center.
For comparison, U.S. President Donald Trump's recent visit to Saudi Arabia resulted in $380 billion in investments, consisting of $110 billion in arms contracts. However, they never went the limits to boast these feats as Iran has gone with a mere $5 billion deal.
The unprecedented, and utterly disgraceful, aspect of the deal lies in the fact that Total, a foreign company, owns 50.1 percent of contract share, China owning 30 percent and Iran a mere 19.9 percent. As a result, the management of this huge gas resource, belonging to the Iranian people, will be handled by a foreign company.
According to the Guardian Council, a body tasked to oversee the parliament's actions, this contract is considered illegal based on Article 81 of Iran's constitution. No contract should place over 50 percent of shares to a foreign company, especially a long-term and classified company set for 25 years.
Based on Article 77 of the Iranian Constitution, the parliament must be informed of all foreign contracts. There is no legal reasoning that even this regime's own MPs have been kept in the dark about contract details.
Total is not even obliged to transfer any technology to Iran as of yet. When the gas field begins to lose its output only then is Total obligated to provide Iran its technology.
Of course, the development, production and other processes of this gas field will take an uncertain amount of years — maybe even 15 years — and when Iran will actually receive technology once the gas output begins to plunge is anyone's guess.
And in reference to Iran's claim of this deal signaling the sanctions wall crumbling, such remarks are only aimed at maintaining a straight face and cloak the failure of the nuclear deal to provide any tangible outcomes.
Congress is back to work and Iran sanctions bill are high on agenda.
The US has practically ripped up the nuclear arms deal with Iran, according to the Financial Times. Washington's efforts to keep Iran at a distance from the international banking system have had much the same effect.
The Financial Action Task Force, an intergovernmental body established to fight global money laundering, warned of the consequences of any deals made with Iran.
FATF listed nine countries, including Iran, who have failed to take action to tackle financial measures aimed at providing to terrorists and money laundering. FATF has practically called on all its members across the globe to carry out special measures against the threats of economic cooperation with Iran.
Iran also is experiencing difficulties in receiving money for its petrochemical products sold to China, according to this regime's Deputy Oil Minister Marzie Shahedaie, citing new Chinese anti-money laundering laws.
Second, only to oil, Iran's petrochemical products consist are this regime's main export to China. Around 40 percent of Iran's petrochemical exports are headed to Beijing, while four Chinese banks are refusing to issue letters of credit to Tehran.
The European Union has renewed its Iran list of sanctioned individuals and entities involved in nuclear and ballistic missile activities. While no names have been added, the list does contain new information.
Individuals with renewed information on the EU list include 23 names such as:
- IRGC Quds Force chief Qassem Suleimani.
- Former IRGC chief Rahim Safavi.
- Former IRGC Basij chief Mohammad Reza Naqdi.
- Deputy Interior Minister for Security Affairs of Iran Mohammad Baqer Zolqadr.
- Former Iranian Atomic Energy Organization Fereydoon Abbasi.
- Mohsen Fakhrizadeh, also involved in Iran's controversial nuclear program
This list also includes 14 nuclear and ballistic missile groups and centers.
These sanctions, and many other crises Iran is facing place this country before significant political instability threatening the fate of such major contracts.
When the U.S. administration continues to weigh its overall Iran policy and regime change is a major possibility on the table before the White House, one cannot consider Iran a politically stable country.
U.S. Secretary of Defense James Mattis has in a recent interview emphasized establishing friendly relations with Iran hinges on regime change. The mullahs in Tehran kill the Iranian people and are the most dangerous Middle East regime, he added.
U.S. Secretary of State Rex Tillerson also spoke of peaceful regime change in a Congressional hearing last month, raising many eyebrows across the globe.
At such a critical juncture the Iranian opposition National Council of Resistance of Iran (NCRI) recently held its famous annual convention in Paris, with hundreds of dignitaries and Iranian expats gathering from four corners of the globe.
All those attending, including former New York Mayor Rudy Giuliani and former House Speaker Newt Gingrich, considered Trump emissaries, underscored the necessity for regime change in Iran.
The NCRI, being the alternative to the regime in Iran, has proven regime change is at hand. Thus, Total and all other parties considering economic or political ties with Iran should reconsider the risk of getting in bed with a regime with such a shaky and doomsday future.
Shahriar Kia is an Iranian dissident and a political analyst on Iran and the Middle East. He is a member of the Iranian opposition and a graduate of North Texas University.
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