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Iran Races to Clinch Oil Deals Before Donald Trump Takes Office

The deals, if finalized, would bring much-needed expertise and foreign investment to Iran’s ailing energy sector.

Just as important, the agreements provide a lifeline to the rest of the world, experts say, critical to keeping dollars flowing and in cementing relations with European and Asian countries. Few Iranian officials like to acknowledge that in public, insisting that the country is immune to outside pressure, but the election of Mr. Trump and his selection of a national security team that views Iran as a major threat in the Middle East seems certain to usher in a new period of tensions.

“Our officials are in a rush to sign contracts with big oil companies in order to have leverage when Trump enters the White House,” said Saeed Laylaz, an economist with close ties to the government of Mr. Rouhani, who has bet his political future on ending Iran’s isolation. Mr. Laylaz pointed out that most European energy giants had been present in Iran for decades and had left only after sanctions, now lifted, were imposed during the Obama administration. “Just as in the past, we need them back here, also to make sure we are not isolated,” he said.

Analysts noted that the deals were only memorandums of understanding, not hard contracts. But they stressed that the agreements also indicated a strong desire by Western and Asian energy companies to return to Iran, once the world’s second-largest exporter of oil.

“It seems the big oil and gas companies in Europe are determined to show Mr. Trump that they are going to make deals with Iran anyway,” said Reza Zandi, an Iranian journalist and analyst who specializes in the oil and gas industries. “These are important signals to America,” he added.

Mr. Zandi said it was not hard to see why the oil companies were so eager to return to Iran. “We need $ 40 billion in investment in the oil and gas sector each year,” he said, “and we don’t have such resources inside the country.”


Representatives of Royal Dutch Shell and Iranian officials at a signing ceremony in Tehran on Wednesday. Credit Abedin Taherkenareh/European Pressphoto Agency

Mr. Rouhani and his government of technocrats are fighting their oil battle on two fronts. Domestically, they face pressure from hard-liners who have been closely scrutinizing the oil contracts, seeking anything that could undermine Iran’s independence and trying to steer them to companies under their control.

But Iran’s oil minister, Bijan Namdar Zangeneh, told the semiofficial news agency Fars in November that only foreign companies had the ability and capital to modernize Iran’s crumbling oil and gas sector. “We need technology, including the management technology that allows a project to come into operation in four years rather than in 12 years,” he said. “And above all, we need the money.”

Iran also faces a struggle to rebuild its oil exports. Growing production has allowed Iran in recent months to recover many of the Asian and European markets that it lost to Saudi Arabia and other OPEC producers during the years when sanctions were in effect. And as Iran effectively flexes its muscles in OPEC for the first time since the sanctions were lifted in January, its goal is not only to protect its newfound gains but also to expand its markets, pitting it directly against its bitter sectarian rival, Saudi Arabia.

Further production and export expansion, however, will require more foreign investment.

The new wave of agreements with Iran, most of which remain provisional, began on Nov. 8, the day of Mr. Trump’s victory, when Total, a French company, became the first Western energy company to negotiate a deal to develop and produce natural gas from a section of a giant Persian Gulf gas field. Total leads a consortium that includes the China National Petroleum Corporation and Petropars, a subsidiary of the Iranian state-run oil company, in the $ 4.8 billion project. The provisional agreement is due to be finalized early next year.

“They are signing before Trump does something,” said Dragan Vuckovic, president of Mediterranean International, a Texas-based oil services company that works in North Africa and the Middle East. “The Iranians will give the Europeans favorable terms because of Trump. They want to send a message to Trump that if you try to cancel this agreement, we will just go to the Europeans.”

Iran needs foreign capital and technical expertise to reach its immediate goal of returning to its 2011 oil production level of 4.3 million barrels a day, reversing a drop that began even before sanctions were imposed. Many Iranian fields are old and in decline, requiring sophisticated and expensive redrilling of wells and injections of water and carbon dioxide to coax more oil from the ground.

Since oil-export sanctions were lifted, Iran’s production has risen almost a third, to about 3.7 million barrels a day, with minimal foreign help. By reaching agreements with Total and Shell, Tehran now has the ambitious goal of reaching production levels of 4.8 million barrels a day by 2021, which would give it added clout in OPEC and the ability to go head-to-head with Saudi Arabia in competing for growing Asian markets, particularly in India.

In past decades, Iran has been aggressive in urging other OPEC members to use their position to manipulate the market for higher prices, while Saudi Arabia has often argued for caution. Saudi Arabia has held the upper hand in recent years, but Iran was a major player at the latest OPEC meeting, as the cartel decided to cut production for the first time in eight years.

It remains to be seen whether the agreement to scale back production, not slated to take effect until January, will hold up. Similar agreements among OPEC members in the past have crumbled in the face of widespread cheating and a lack of an enforcement mechanism. The agreement is also contingent on cooperation from a handful of non-OPEC producers, particularly Russia, which is notoriously unreliable in such matters, said Philip K. Verleger Jr., an energy economist who served in the Ford and Carter administrations.

“There is no one who will concede market share, and so there is no way to come to an enforceable agreement,” Mr. Verleger said.

But just the fact that Iran was able to play a leading role at the OPEC meeting is a sign that its leaders are determined to return to world markets — as long as they are not stymied once again by geopolitical developments.

Source: NYT > World

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