Global Business in Iran Update, April 2 - May 17
Iranian companies take over Turkish TPAO’s South Pars work; Daimler, Total, Eni, Petronas, KPMG, Lukoil, PricewaterhouseCoopers and Ernst & Young halt business; two Australian companies face scrutiny for potential sanctions violations; Iran warns Royal Dutch Shell and Repsol on lack of activity on South Pars; UAE’s Dragon Oil renews contract with Iran; Zimbabwe and Iran ink uranium deal; California State Pension system still not in compliance with Iran sanctions laws; and updated target goals for Russian delivery of S-300 system and work on Bushehr reactor.
New projects in Iran:
(April 22, 2010) Australian Defense Minister John Faulkner has reportedly considered blocking Stolway's multimillion dollar contract with Iran because he believes the exports will be used to undermine sanctions legislation against the rogue regime’s nuclear program. The company insists otherwise. See Global Business in Iran for more details.
(April 29, 2010) GBC Scientific Equipment, an Australian manufacturer of scientific instruments, has recently relocated most of its production facilities to Malaysia. This is due to the obstruction of several deals GBC maintained with Iran for scientific equipment, notably analytical instrumentation, that the Australian government says could be used for Iran's nuclear program. Further, equipment, identical to the type made by GBC, was seen at an Iranian trade show in late April though it used branding of an American company that says it has not done business with Iran since 2004. See Global Business in Iran for more details.
(April 27, 2010) Due to increased political pressure, Total SA has announced that it will cease all new investment into Iran. Furthermore, should a sanctions bill be passed by the UN, Total will cease all gasoline sales to the Islamic Republic. See Global Business in Iran for more details.
(April 13, 2010) Siemens AG and two other unnamed European firms have signed a contract with Iran's Lordegan Petrochemical Company to provide equipment for one of the company's petrochemical complexes. This report would seem to indicate a reversal of a late January decision not to invest in any more Iranian projects. The German conglomerate did say that the ban announced in January would go into effect in the middle of 2010, though no specific date has been given. See Global Business in Iran for more details.
(April 14, 2010) Daimler has recently withdrawn its application to export vehicles to Iran and its business in country will be limited to only fulfilling contractual obligations. Furthermore, it will be divesting itself from its 30 percent stake in Iranian Diesel Engine Manufacturing, a subsidiary of Iranian Khodro Diesel, and will halt its relationship with the company. See Global Business in Iran for more details.
(April 2, 2010) Kazakhstan, Central Asia’s largest grain producer, plans to open a grain storage terminal at the Amirabad port in Iran in May. This is to increase shipments through the centrally located nation. Furthermore, it plans to build a new railway link through Turkmenistan to increase the ease of exporting grain across the Middle East and Asia. See here for more details.
(April 6, 2010) Iran and Kuwait have begun talks on the construction of a 570 kilometer pipeline to export gas from the Islamic Republic to the gulf state. Negotiations are ongoing and the final terms of the deal have not been crafted yet. See here for more details.
(April 15, 2010) On April 15, Reuters reported that Petronas, Malaysia’s national petroleum company would halt fuel sales to Iran due to impending sanctions. Though the PM of Malaysia denied these reports, they continue to circulate, and, as recently as May 4, Reuters reported that Petronas had withdrawn from Iran and ceased fuel sales to the Persian theocracy. See Global Business in Iran for more details.
(April 7, 2010) Lukoil plans to halt gasoline sales to Iran in the near future. Lukoil is not one of the larger exporters of gasoline to the Islamic Republic, exporting only 250,000 to 500,000 barrels of gasoline to Iran every other month, compared to Total’s monthly shipment of over 1 million barrels. This business halt, combined with Lukoil’s recent withdrawal from a major project in Iran, is a sign that the company has decided to withdraw completely from the Iranian market. See Global Business in Iran for more details.
(April 26, 2010) Turkmenistan plans to increase gas shipments to Iran by 8 million cubic meters a day this year; 40 mcm a day up from 32 mcm a day currently. While there are plans to increase exports to Iran to 20 billion cubic meters a year, this will require construction of a new pipeline. See here and here for more details.
(April 26, 2010) A recent trip to Uganda by Iranian president Mahmoud Ahmadinejad did not result in an oil deal for the African country. Last year, Ugandan president Yoweri Museveni invited Iranian investors to build a refinery in his country but, due to the threat of American and UN sanctions, no deal was passed when Ahmadinejad visited the country recently. See here and here for more details.
(March 23, 2010) The Government Accountability Office released a report in late March of 2010 detailing 41 large international companies with major oil and gas investments in Iran. It remains to be seen what penalties will be levied against the companies on this list that do business with the United States. See here for more details and the text of the report.
(May 13, 2010) Due to the efforts of California Insurance Commissioner Steve Poizner, more than 1000 of California’s 1300 insurers have agreed to avoid future investments with corporations that do business in Iran. Though a recent California audit did note that no insurers had direct investments in the Islamic Republic, Poizner urged the companies to go one step further. See here and here for more details.
(April 24, 2010) In a secret deal last month, Zimbabwe and Iran agreed to allow the Islamic Republic to mine uranium in the African nation, according to a recently released Sunday Telegraph article. . This will allow Iran to both replenish its diminished uranium supplies and allow it to advance its nuclear program. In exchange for access to this fissile material, Iran would supply the cash-strapped Zimbabwe with oil. See here and here for more details.
Updates to Existing Business Projects:
(April 29, 2010) In May of 2009, Italy's Eni signed a $1.5 billion deal for development of Phase III of Iran's Darkhovin oil field. Eni was already active in Iran to the tune of $550 million. In February 2010, Eni announced that it would pull out of Iran after the expiration of existing contracts and in late April 2010, Eni announced that it would cease operations on the Darkhovin field due to sanctions. See Global Business in Iran for more details.
(April 2, 2010) Due to concerns regarding impending sanctions, KPMG severed ties with its Iranian member firm. This came three weeks after UANI targeted the accountancy firm due to its ties to the Islamic Republic. See Global Business in Iran for more details.
(April 8, 2010) In 2007, Russia agreed to sell Iran five of the sophisticated S-300 anti-air missile systems. The contract is estimated to be worth $800 million. Despite criticism, Russia has repeatedly insisted the deal would proceed as planned.
Following the visit of Prime Minister Benjamin Netanyahu in February of 2010 , Russia delayed delivery of the weapons system due to technical problems. Russian foreign ministry officials have said that they would honor the agreement, although gave no immediate timetable. In April of 2010, Russia announced that it was committed to fulfilling its contract with Iran to supply the S-300 system. See Global Business in Iran for more details.
(April 7, 2010) On April 7th, 2010, Russia announced it was ready to ship the second batch of depleted uranium fuel for the Bushehr reactor. This fuel will be shipped one year after the reactor starts operation and will be used to power the plant once the first batch of fuel is depleted.
Russia recently announced that it would start up the plant in the late summer, most likely August, prompting outcry from the United States. As of June 2009, the Russian Nuclear Corporation planned to complete construction of the Bushehr Nuclear Reactor. Moscow and Tehran have discussed the possibility of setting up a ten-year nuclear fuel delivery plan, but both sides have focused on finishing the reactor. On 16 November 2009, Russia said that due to "technical considerations", the power plant would not be completed by the end of 2009. See Global Business in Iran for more details.
(April 26, 2010) Shell signed on with Spanish firm Repsol in 2002 to develop the South Pars Phase 13 and 14 gas fields. At the moment, however, the Iranian government has issued an ultimatum to both companies given their reluctance to move forward on the project due to Western pressure. The Iranian government’s deadline has been extended several times. See Global Business in Iran for more details.
(April 21, 2010) In 2008, TPAO, the Turkish state owned petroleum corporation, inked a $3.5 billion deal to develop South Pars Phases 22-24. Turkey and TPAO, however, had not inked a final deal with Iran despite a deadline to do so in late 2009. According to Iranian sources, in late April of 2010, a consortium made up of Khatam-al Anbiya and several other major Iranian companies will take over Turkey’s role in the project though Turkish foreign minister Ahmet Davutoğlu has denied the nation’s exit from South Pars. See Global Business in Iran for more details.
UNITED ARAB EMIRATES
(April 22, 2010) Dragon Oil, an Emirati petroleum company, recently renewed a crude swap contract with Iran. Dragon, with oil production facilities in the Caucuses, would give Iran the oil it had gotten in the West and Iran would release an equal amount of oil for sale by Dragon in Asian markets. The Emeriti company, which has done business with Iran for nearly a decade, has had trouble renewing this contract due to a depressed oil market. As such, the Islamic Republic is now much less willing to engage in crude swap deals and has reportedly charged Dragon Oil a hefty markup over the previous contract. See Global Business in Iran for more details.
(April 26, 2010) According to Press TV, following talks in summer and autumn 2009, Royal Dutch Shell was close to finalizing negotiations concerning their participation in South Pars Phase 13 and 14. Shell signed on with Spanish firm Repsol in 2002 to develop the giant gas field, and further contracted to invest in Persian LNG, using gas from South Pars to create LNG for export. The current status of this project is unclear given Royal Dutch Shell's recent announcement that it will halt gasoline sales to Iran. The project appears to be on hold as Iran has issued an ultimatum to Royal Dutch Shell and Repsol to make a decision soon. There is no information on the current status of decisions. See Global Business in Iran for more details.
(April 23, 2010) Following its rival KPMG, Ernst and Young has decided to withdraw from Iran by cutting ties with subsidiary firms in the Islamic Republic. This recent halt in business, coupled with PriceWaterhouseCoopers' decision to exit the country, leaves none of the big four accounting firms operating in Iran. See Global Business in Iran for more details.
(April 23, 2010) PricewaterhouseCoopers has decided to withdraw from Iran. This recent halt in business, coupled with Ernst and Young's decision to exit the country means that none of the big four accounting firms are currently operating in the Islamic Republic. See Global Business in Iran for more details.
(May 12, 2010) The California State Public Employees' Retirement System, (CalPERS) is under scrutiny for failing to divest nearly $900 million of assets invested in firms that do business in Iran's energy or defense industries. In 2007, California passed a law mandating the state sell its stakes in such companies. Nearly 23 international companies have been identified from CalPERS $200 billion portfolio. According to a May 2010 report, despite being in violation of a 2008 law, CalPERS has still resisted calls to cease investing in companies that do business in Iran, citing $24 million in transaction fees for getting rid of the investments in question. When asked for comment, CalPERS has maintained that it is talking with companies to withdraw from Iran rather than ceasing investments wholesale though it did not detail its progress on these efforts. See Global Business in Iran for more details.
(May 7, 2010) The jointly controlled Iranian-Venezuelan company VENIROGC has announced that it will build a refinery in Syria as its first international project. The refinery would have an initial capacity of 140,000 bpd. The project is estimated to cost $1.5 billion. Iran will supply 20 percent of the crude, Venezuela, 30 percent, and Syria the rest. In addition to this Syrian project, the company plans to conduct feasibility studies on the launching of oil storage facilities in China and Africa. See Global Business in Iran for more details.