Foreign firms have started leaving Iran and stopping imports in line with sanctions approved by the US government and the EU.
Repsol YPF has announced it will be withdrawing from the South Pars phases 13 and 14, which it jointly won with Royal Dutch Shell.
Earlier this month, US congress voted for unilateral sanctions against Iran, which included blocks on dealing with Iranian energy companies and the Iranian banking sector. Firms that provide refined petroleum to Iran will also be denied access to US markets. Repsol has extensive economic interests in the Gulf of Mexico. Similar legislation aimed at the Iranian energy sector has also been introduced by the European Union, further prompting Repsol.
The decision has come about as Iran gave an ultimatum to Repsol to make a final decision on the project. Shell refused to make a final decision but indicated that it would comply with international trade restrictions. As a result, the exploration and production work of these phases will be awarded to the Iranian Khatam-ol-Osea group for US$ 5 billion instead, according to the state-run Mehr news agency.
Hojatollah Ghanimifard, vice president in charge of investment affairs at the National Iranian Oil Co., said that Shell and Repsol’s decisions had nothing to do with the new economic sanctions, but were linked to the financial crisis. It's "because of problems the country [Spain] cannot sort out," the official said. This may be hard to believe though in light of the heavy sanctions now coming to bear on Iran.
They are not the only companies who are re-evaluating their future in the Islamic republic, Total have also stopped selling refined petroleum to Iran. "Total has suspended its sales of gasoline or refined products to Iran," a company spokesman said in Paris. The ban on importing petroleum may hit Iran particularly hard as the country, in spite of its vast reserves, is heavily reliant on imported fuel, currently having to import 30 - 40% of its fuel needs due to a lack of refining capacity, brought on by a chronic lack of investment.
It is not just western countries though that are withdrawing from Iran, Iran’s neighbours are also towing the line. The UAE’s central bank has told financial institutions to freeze the accounts of Iranian owned firms in line with the restrictions on the Iranian banking sector.
It remains to be seen how Iran will fill the vacuum left by departing western firms.
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