Iran delighted about energy deals despite Iran-Libya Sanctions Act

Jul 13, 2001 02:00 AM

Energy-rich Iran has been jumping with jubilation after clenching a series of multi-million dollar deals with global economic giants despite US Congress efforts to stifle the Islamic republic. Energy groups in both Italy and Japan have reached deals with Iran on oil development -- moves that appear to defy the US Iran-Libya Sanctions Act (ILSA).
ILSA, which the US Congress seems poised to extend, calls for sanctions on foreign firms investing in Iranian or Libyan oil and gas industries. The Italian energy group, ENI, signed a contract worth $ 1 bn on June 30 to develop the Darkhuwain oil field in south-western Iran, devoting $ 550 mm over a period of five and a half years.

ENI's CEO Vittorio Mincato said, upon signing of the contract, that "the spirit of co-operation and the deep- rooted bonds of friendship between Iran and Italian ENI prevailed over every difficulty," which includes ENI's concern over possible punishment from the sanction-happy US. Located in Khuzestan Province, the oil field is expected to pump out 100,000 bpd in the first phase and 160,000 bpd in the second phase.
Viewed as a tough foreign policy test for US President George W. Bush, the ENI-Iran deal came just one month before the US Congress is scheduled to vote on renewal of the act. The act will lapse in August. But recent developments in Washington indicate US Congress and the Bush administration are split over the number of years regarding the extension of the sanctions.
The White House favours two years and Congress is arguing for five. As debate rages inside the US, European and Asian oil companies have wasted no time trying to secure their share of reliable energy from Iran, which boasts the world's second largest proven gas reserves, next to Russia, and the third largest proven oil reserves, after Saudi Arabia and Iraq.

Following ENI, energy-thirsty Japan has also started striding into Iran's energy market by securing a major role in developing the enormous Azadegan oil field in south-western Iran, estimated to have 26 bn to 40 bn barrels of oil reserves. During an eye-catching trip to Iran, Takeo Hiranuma, Japan's international trade and industry minister, pursued Japan's role in developing Azadegan, putting Japan in a favourable position to tap one of the biggest undeveloped oil fields in the world.
Hiranuma, the first Japanese trade minister to visit Iran since the Islamic revolution in 1979, told that his country hopes to strengthen co-operation with Iran in oil development. He explained that national interests override any consideration of US pressure, saying "we have created the necessary legal basis for our oil sectors to be able to participate in projects abroad without fear of US opposition." If inked, the Azadegan contract would be worth more than $ 8 bn and would be the best gift Iran could ever offer to Japan, its main trade partner in Asia.

Production from Azadegan is expected to start in 2005, with a maximum estimated output of 800,000 bpd. Iran's success in attracting foreign investment is a setback for US energy companies, which in recent years have pushed hard for the lifting or weakening of sanctions on Iran.
US firms have lamented the ill-conceived sanctions, which deny them entrance into Iran's energy fields while non-US companies repeatedly grab Iranian oil contracts. A double-edged sword, the sanctions have cost the US billions of dollars annually, according to reports released by some US institutions. Tens of thousands of American workers have lost their jobs, directly or otherwise, due to the sanctions.
As more non-US companies, like Abbot Group, Britain's largest oil drilling contractor, continue eying Iran's lucrative energy market, more deals could emerge as political hot potatoes for the US. Whether to keep strangling Iran while isolating itself from its allies or to loosen the bonds on Iran by making its energy accessible to all is a dilemma the US will have to weigh carefully in limited days.

Source: Xinhua
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