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.
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