French oil major Total warned on Wednesday it will abandon a major gas field project in Iran unless it is exempt from U.S. sanctions against Tehran.
Continuing to do business in Iran would be too great a risk as the company has large operations in the US and depends on the country's banks for financing its operations, Total (tot) said in a statement Wednesday.
On May 8 President Donald Trump announced his decision to withdraw the USA from the Iran nuclear deal, also pledging to reinstate the anti-Iranian sanctions that were lifted as a result of the agreement.
South Pars phase 11 development is aimed initially at domestic gas demand.
Total faces losses of several tens of millions of dollars if it pulls out of the project.
European Commissioner for Migration and Home Affairs Dimitris Avramopoulos, for his part, said that the EU is discussing "the possibility of applying our blocking statute" to protect the interests of European companies from the re-introduction of USA anti-Iranian sanctions.
According to the agreement, CNPC could take over Total's 50.1 percent stake and become operator of the project if Total withdraws from Iran.More news: Iran says Syria has every right to defend itself against Israel
The administration of President Donald Trump is phasing back in sanctions after his withdrawal last week from the Iran nuclear deal. Joe Kaeser, the CEO of Germany's Siemens (SIEGn.DE), told CNN his company would not be able to do any new business with Tehran. The company has a few options if they leave.
Total said it "is engaging with the French and USA authorities to examine the possibility of a project waiver".
In March, Total CEO Patrick Pouyanné said the company would seek a waiver to continue the development of the gas field if the U.S. made a decision to reimpose sanctions. Total does about 30 percent of its business through the United States banking system.
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.
"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".
A European diplomat was more blunt: "We have a situation where there is a will to impose sanctions on Europeans and a resentment towards European companies who are now being accused of supporting a terrorist state. The EU can't compel or really protect the private sector", Sanam Vakil, associate fellow at Chatham House said of Total's announcement. In an ironic twist, Trump's decision to threaten European companies that continue to invest in Iran may open the door to Chinese rivals.
Under the contract's term, CNPC will take Total's shares in the project if the French company pulls out of the contract, Zanganeh said, Iran's media outlets reported.