The Strategist

Beijing aims at South Pars

06/11/2018 - 04:48

China may take possession of the world's largest gas field in Iran thanks to American sanctions against Iran and Total’s forthcoming leave.

Hamed Malekpour
Hamed Malekpour
Tehran is ready to transfer the share of the French oil giant Total in the South Pars gas field to the Chinese partner. In July 2017, Total signed with Tehran an agreement worth $ 4.8 billion to develop the 11th phase of South Pars, the largest gas field on the planet, the northern part of which belongs to Qatar. A month ago Donald Trump announced unilateral withdrawal of the US from the nuclear deal on Iran and the return of anti-Iran sanctions, many companies operating in this Asian country after the deal in 2015 were frightened of secondary US sanctions and began to curtail their activities in the Islamic Republic of Iran. Total is no exception.

"Total has 60 days to negotiate with the US administration," Iran's oil minister, Bijan Zanganeh, said in an interview with the Financial Times. "The French government can also take advantage of these 60 days to persuade the US administration to allow Total to stay in Iran. If the US administration refuses to make an exception for Total, the French company will be replaced by a Chinese company."

He is referring to China National Petroleum Corporation (CNPC), which owns 30% of the project. CNPC is the most likely candidate for obtaining the share of colleagues from France, which is 50.1%. The remaining 10% belong to the Iranian company Petropars.

Total announced the beginning of negotiations with the French and American authorities on the possibility of further work in Iran on May 16. By the way, such a force-majeure was stipulated in the contract.

In case of failed negotiations with the White House, Total will have to leave because American market is much more important for all Western companies than Iran. By the way, the example of Total clearly shows importance of the American market. Secondary sanctions in case of continuing work in Iran and after November 5 threaten to paralyze the entire financial activity of the French oil and gas giant, because over 90% of all its financial transactions pass through American banks.

Recall that France is one of the six participants in the nuclear deal on Iran, which is officially called the Joint Comprehensive Plan of Action (JCPOA). The other signatories - Russia, China, Britain, France and the Federal Republic of Germany - unsuccessfully tried to persuade President Trump to stay in the agreement, which he called "the worst deal" during the election campaign. The US accuses Iran of destabilizing the situation in the Middle East by financing paramilitary groups and organizations abroad and developing ballistic missiles. Iran, in turn, accuses the US of financing paramilitary organizations and violating sovereignty of the countries of the region.

Foreign Minister Wang Yi said on Monday that Chinese President Xi Jinping invited Iranian counterpart Hassan Rouhani to attend the SCO summit in June in Qingdao. Chinese and Iranian diplomats have already discussed the possibility of preserving a nuclear deal without the United States.

To support rapid economic growth, the Celestial Empire needs huge amounts of energy. Hence the growing interest in Iran, from which all western companies are now fleeing. With the same goal, Beijing is expanding and deepening its energy and economy ties with Russia.