By Heshmat Alavi
European oil giants may be having second thoughts on returning to Iran and investing in its oil industry considering the victory of Donald Trump in the U.S. presidential elections. French oil giant Total is anxiously seeking to spearhead a consortium including China National Petroleum Corporation aimed at developing and tapping further into Iran’s colossal South Pars gas field. While others are interested, many are hesitating and waiting out for the investment outlook to become more reliable.
Trump’s shocking recent victory has placed a question mark over the oil production recovery Iran has enjoyed after recent sanctions relief following the nuclear deal with the West.
Iran relies heavily on the West investing into its aging oil industry. This is where the election of Donald Trump becomes a major issue for European oil majors. During the presidential campaign Trump had very publicly threatened to tear up the nuclear deal sealed between Tehran and international negotiators in exchange for sanctions relief.
A huge risk is awaiting European energy companies currently forming a line to invest in Iran’s profitable oil and gas reserves. Trump and his administration are likely to exploit the provisions placed in the nuclear pact, rendering a return of sanctions penalizing firms investing in Iran’s oil and gas sector.
Trump can launch this process by holding back any certification on Iran complying with the deal terms. It is a known fact that Iran has twice violated the nuclear agreement by exceeding heavy water amount limits. However, the Obama administration, especially the energy secretary and the State Department have continuously rushed to Iran’s rescue, saying the mullahs immediately took measures to resolve the matter.
With Trump coming into office, Iran and the international community should not expect any such graciousness. Each violation on Iran’s part may lead to a return of sanctions. This should also not be forgotten that Iran needs the nuclear agreement more than the any member of the international community.
Foreign companies will have to make a tough decision if sanctions are renewed. Choosing to do business with Iran or face being deprived of the U.S. financial system.
Iran is not exactly the easiest place to do any business, as terms of the contract remain a major challenge. Choosing between the markets of America and Iran is a silly question for any company.
While prospects of investing in Iran remain stunning–being the world’s second largest gas reserve and enjoying the fourth largest crude oil deposit–the regime is literally terrified of the side-effects of Trump taking over the helm in Washington.
Heshmat Alavi is a political/human rights activist focusing on Iran and the Middle East.
He tweets at @HeshmatAlavi