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One thing emerged clearly during my four days of meetings with the Iranians in Frankfurt last week. There is now enough European support to allow Iran to move forward with some of the biggest natural gas and LNG (liquefied natural gas) projects in a decade.
There are still long negotiations ahead, with considerable risk assessment necessary throughout the design and implementation stages.
Some of these projects will never see the light of day because the risk factor will simply be too high. That's despite the impressive bottom line potential here. You see, these deals will likely provide access to deeply discounted natural resources.
Both the governments in London and Berlin have announced intentions to increase business dealings with Tehran.
And major energy companies such as French Total SA (NYSE: TOT) and Anglo-Dutch Royal Dutch Shell Plc. (NYSE: RDS.A) are now well into what they hope will be multibillion-dollar natural gas and LNG projects.
There's just one stumbling block left…
The United States.
American Sanctions Affect Even European Companies
Rumblings from the new Trump administration that new heavy sanctions should be applied on Tehran has thrown some cold water on the European rush into Iran.
That's because Washington can apply secondary sanctions to anybody involved in Iranian hydrocarbons, applied directly to the miscreant's U.S.-based assets.
Just ask major French bank BNP Paribas SA (OTCMKTS ADR: BNPQY). It's on the receiving end of an $8.9 billion settlement agreement for violating U.S. sanctions against Sudan, Cuba, and Iran between 2004 and 2012. The bank also received a five-year probation.
What the bank did was not in violation of either French or European law. But it nonetheless ran afoul of U.S. restrictions. Now, I'm not defending what BNP Paribas did. They acted knowing they were in violation of U.S. law (specifically the International Emergency Economic Powers Act and the Trading with the Enemy Act), did so willingly in an attempt to evade statute, and were prosecuted accordingly.
But under the current conditions such prosecutions may be counterproductive.
Iranian Sanctions Relief Is Staggered
The Iranian nuclear accord – technically the Joint Comprehensive Plan of Action (JCPoA) – was signed between the five permanent members of the United Nations Security Council (the U.S., UK, France, Russia, and China), plus Germany on the one hand (the so-called 5+1) and the Islamic Republic of Iran on the other. JCPoA was agreed to on July 14, 2015, adopted on Oct. 18, and implemented on Jan. 16, 2016.
In return for moving away from a nuclear program that could be used for military purposes (a goal Tehran has always denied) and subjecting itself to detailed scrutiny by the International Atomic Energy Agency (IAEA), the West has agreed to remove sanctions.
Much misunderstanding surrounds the agreement, with it being the fodder of numerous political debates in the United States. JCPoA encompasses a text, five annexes, and is 159 pages in total. The ent…
About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.