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Total to drop billion-dollar Iranian gas project unless United States waives sanctions

17 May 2018

French oil and energy company Total said on Wednesday that may pull out of the Iran South Pars 11 energy project, in light of a decision by US President Donald Trump to withdraw from an worldwide nuclear deal with Iran.

As a outcome, "Complete is not going to be able to proceed the SP11 challenge and should unwind all related operations earlier than four November 2018 except Complete is granted a selected challenge waiver by the USA authorities with the assist of the French and European authorities", the French firm mentioned in a press release.

United States banks are involved in more than 90% of Total?s financing operations, Total said, adding that USA assets represent more than $10 billion of capital employed and that 30% of its shareholders are in the US.

Total said any waiver would need to include protection from secondary sanctions that Washington might impose on companies that continue to do business with Iran.

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Officials in China and Russian Federation have indicated they will resist U.S. sanctions and capitalize on the void created if European companies withdraw from the Iranian market. Russian Federation has also said it remains committed to the deal.

When the Iran agreement was signed and sanctions were ended, Total was among the first corporations to sign business agreements with the Iranian government. "They have us by the throat because so much business is conducted and cleared in dollars", one European investment banker said.

In its statement, Total said it was requesting a waiver that would protect it from all "secondary" sanctions under United States legislation, and that it had engaged USA and French authorities to "examine the possibility" of an exemption. The company has a few options if they leave.

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The French company said it had so far spent less than 40 million euros ($47 million) on the South Pars project, and that pulling out of it would not impact the company's general production growth targets.

"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".

These renewed sanctions imposed by President Trump have left some major European companies in a quandary as to what to do with their business operations. "With that in mind it's a logical decision".

The French state-backed oil group said that without an exemption from the USA it would halt work at the world's largest gas field and wind down all its activities by November 4.

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Industry sources told Reuters this week that China's CNPC, which holds a 30 percent stake in the South Pars project, was ready to take over Total's majority stake in the project if it pulled out.

Total to drop billion-dollar Iranian gas project unless United States waives sanctions