Oil in Global Economy Series: Total’s departure from lucrative Iranian gas project shows biting power of U.S. sanctions

In a world where the U.S. dollar continues to dominate global trade transactions and global reserve, sanctions imposed by the United States have biting effects and the latest departure of European oil giant ‘Total’ from the lucrative gas project in Iran in response to the U.S. sanctions just demonstrates that. As of 2018, U.S. dollar enjoys more than 60 percent share of global currency reserves and 40 percent share of global transactions.

About two months ago, the officials at the French oil giant ‘Total’ informed Iran that it would have to leave its contract to develop Phase 11 of Iran's South Pars energy hub, if it fails to receive a waiver from the U.S. Treasury Department from the sanctions, a part of which was re-imposed in August and the rest would be by November this year. Iran’s oil ministry has confirmed its departure and announced that the contract is thus terminated.

As a deal was reached between Iran and six world powers including the United States back in 2015, the project was awarded to a consortium comprising Total (50.1 percent), China's CNPC (30 percent) and Iran's Petropars (19.9 percent) through a contract worth around $4 billion. Total had signed up to develop the same project back in 2009 but was forced to abandon its projects in Iran in 2012 when France joined a US-led campaign to put sanctions, including an oil embargo, against the country. With Total gone, China’s CNPC is expected to assume 80 percent stake in the project. The project has been a lucrative one as it is estimated to have pumped 2 billion cubic feet of gas every day, once complete.  

One must note that the departure came despite the fact that the European Union has activated a provision in the treaty which bans European companies from abiding by U.S. sanctions.