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BP marches back into Iran
By
Hooman Peimani
Although its share of the Iranian
market is still much smaller than that of other European
companies such as France's Total, British Petroleum (BP)
has succeeded in restoring its presence in the country's
lucrative market after years of exclusion.
The
1979 Iranian revolution deteriorated Iran's relations
with many regional and non-regional countries. The new
political environment suddenly ended or sharply reduced
the operation in Iran of American and European oil
companies. Within this context, worsening
Iranian-British relations reflected in lowering their
diplomatic ties to the minimum in the early 1980s,
especially affecting British oil companies operating in
Iran.
In particular, two major factors were
responsible for such development. These were the British
government's involvement in the Anglo-American 1953 coup
in Iran and the membership of BP in a consortium of
American-dominated Western oil companies ("seven
sisters"), which imposed an unfavorable oil contract on
Iran following the coup. Among other objectives, the
coup and the contract aimed at undoing Iran's gain from
the nationalization of its oil industry in 1952.
Added to these, BP's monopolistic role in the
development of Iran's oil industry in the late 19th
century, which continued until the mentioned coup,
created a very negative sentiment in Iran towards
British companies. The Iranians identified them as major
exploiters of their oil resources and as a blatant
symbol of foreign interference in their internal
affairs.
Iranian-British estranged ties began to
improve gradually after the 1997 election of Iranian
President Mohammad Khatami, who aimed at normalizing his
country's ties with various neighboring and
non-neighboring states. In this regard, Iran's relations
with all the European Union (EU) countries, excluding
Britain, improved quickly. Added to Britain's close ties
with the United States, the persistence of suspicion on
both sides made that country the last EU state to
normalize relations with Iran.
Compared to other
EU countries, such as France, Germany, Italy and Spain,
Britain's economic relations with Iran have not grown
impressively. The memory of Britain's interference in
Iran's internal affairs for about a century ending in
1979 and a concern about its efforts to restore that
type of relations with Iran have been the major reasons
for Iran's reluctance in having extensive economic
relations with that country. Britain's imposition of
certain economic sanctions on Iran, such as its ban on
selling weapons and devices with dual usage (military
and non-military) to that country, has been an
additional factor.
Although the British have not
been very successful in their economic relations with
the Iranians in general, they have made an inroad in the
fossil-energy industry of Iran, a country with the
world's second largest natural gas deposits and its
fifth largest oil reserves. This has been evident in
BP's success in returning to Iran in 1997 when it opened
its office after years of absence, an important event in
itself and a clear indication of warming Iranian-British
relations.
According to David Dalton, country
director for Iran, BP has since increased its operations
in Iran in certain fields. It has been purchasing
Iranian oil-related products, which has turned it into a
"major crude oil and oil products client" of Iran.
BP has also participated in the development of a
technically "difficult" Ahvaz (Bangstan) oil field
through a buy-back agreement, which enabled the National
Iranian Oil Company (NIOC) to benefit from BP's "high
expertise ... gained in similar world oil fields". As
stated by Dalton, BP now hopes to expand its involvement
in Iran's oil company by taking part in various NIOC
projects, provided that it reaches an agreement with
NIOC on that area.
As well, BP has been involved
in a joint venture with an Iranian company (Fouman Shimi
Co) to produce motor oil, while entering the Iranian
petrochemical industry through BP Chemicals Co. It now
has "three licenses for presenting polyethylene
technology in Iran".
All the mentioned fields of
activities may eventually enable BP to expand
significantly in the Iranian market. However, its
involvement in Iran's emerging liquefied natural gas
(LNG) industry for export purposes, if continued, seems
to have the potential to turn it into a major player in
that country's energy industry.
Given Iran's
vast but still mainly undeveloped gas resources and its
eagerness to turn itself into a major gas exporter, BP's
major involvement in such a project could significantly
uplift its international status in the LNG field.
According to Dalton, BP could help Iran export its gas
to "some of the world's key markets" where BP operates
as it is "the first gas producer in the US and Britain.
It has a considerable share in the Spanish market and is
currently making investments in the Chinese and Indian
markets."
As stated by Dalton, BP is currently
cooperating with NIOC on its first LNG project to export
gas from the South Pars gas field to India and other
markets. In this regard, that company also participates
in Iran's LNG consortium "along with NIOC and Reliance
from India". South Pars is the world's largest operating
gas field owned jointly by Iran and Qatar.
Iran's plan to develop that gigantic gas field
through buy-back agreements has so far attracted major
international oil companies, including Total, Russia's
Gazprom and Malaysia's Petronas. BP, according to
Dalton, "has also attended the bid on the development
project of South Pars gas field's 11th phase aiming to
present gas to [an] LNG plant".
As a British
company, BP's expanding operation in Iran reflects
symbolically the quiet growth of British-Iranian
relations after about two decades of difficulties.
Particularly, it indicates the British government's
efforts to expand its ties with Iran to catch up with
other EU countries with large and expanding political
and economic relations with that country, namely France,
Germany, Italy and increasingly so Spain.
Given
its close cooperation with Iran's archenemy, the United
States, seeking to weaken Iran economically and
politically, such efforts demonstrates the British
government's recognition of Iran's importance as a
rising regional power.
Dr Hooman
Peimani works as an independent consultant with
international organizations in Geneva and does research
in international relations.
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