From our Special Correspondent in the oil industry:
From the BBC:
France has condemned as “unacceptable” a US move to re-impose sanctions on companies trading with Iran.
The action from Washington followed President Donald Trump’s decision to pull out of a landmark deal that sought to curb Iran’s nuclear programme.
French Foreign Minister Jean-Yves Le Drian said European companies should not have to pay for the US decision.
So much for this being about Iran’s nuclear capabilities, eh? Now if France had said it disagrees with Trump’s assessment of the effectiveness of the deal, fair enough. But complaining about lost business? Well, this is partly why Trump thought it a bad deal in the first place: he knew the Europeans were backing it only for their commercial self-interest.
In an interview with Le Parisien, the foreign minister said: “We feel that the extraterritoriality of their sanction measures are unacceptable.
He probably has a point here: the extraterritoriality of the US Department of Justice and Treasury Department is something which grates, but what are they going to do about it? Besides, the US would just say words to the effect of “You may do as you please, but if you wish to use our currency, equipment, or software you must abide by our rules.”
The Europeans should not have to pay for the withdrawal from an agreement by the United States, to which they had themselves contributed.”
A number of French firms have have signed billion dollar agreements with Iran since the nuclear accord was signed in 2015.
They include Airbus, the oil giant Total and the car makers Renault and Peugeot.
They would have to wind up investments by November or face US sanctions.
Now on this point I have no sympathy whatsoever. In his book Private Empire: ExxonMobil and American Power, Steve Coll recounts the circumstances surrounding the establishment of the Sakhalin-1 consortium with Rosneft:
Delays, arguments, and disputes over environmental issues, pipeline routes, and other subjects stalked Sakhalin-1 from its inception.
Under pressure, [ExxonMobil CEO Rex] Tillerson applied the Exxon formula: no surrender. “We jacked this all the way to the top,” recalled one of his colleagues. “We brought the issue up with the president [Putin] and we said, ‘Look, we have got the contract signed, we are doing everything we are supposed to do – here are the rules. And these guys don’t want to follow the rules. What are you going to do about it?’”
Putin offered to write out an executive order saying that Sakhalin-1 could proceed, but Tillerson refused. Putin did not have enough legal authority to satisfy ExxonMobil; Tillerson said he did not want to operate by decree, but by durable laws. Tillerson wanted to have “all the t’s crossed and the i’s dotted exactly according to Russian law and regulation, and if we couldn’t get it done, then we were not going to do it,” the former executive remembered. Ultimately, after Putin “blew his stack” at ExxonMobil’s affront, the Russian president agreed.
In short, Rex Tillerson didn’t want to base major investment decisions on the basis of some backroom deal with the President which likely had no basis in Russian law. This was inherently sensible, not least because of what transpired in Russia in later years when the legality of the oil deals of the 1990s was subject to intense scrutiny.
The Iran deal Obama signed was nothing but a shady backroom deal done for utterly self-serving political reasons, seized upon by Europeans in order to further their own commercial interests. It was not legally binding because Obama never bothered to put it in front of Congress, knowing full well it wouldn’t pass. I’m not even sure Iran has any legally binding commitments under the agreement; did they even sign it? Companies are wary about making investments based on bits of paper signed by the presidents of African countries without government approval, yet here they were willing to cast caution to the wind when Obama did the same. If these companies have indeed made serious capital outlays on the basis of this deal, particularly after Trump announced during his candidacy that he would withdraw from it, then I believe they have been negligent to the point their shareholders can launch a class-action lawsuit. Thankfully I’m just a blogger rather than a lawyer, but I am sure the vultures are circling in New York and Chicago as I type.