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    Middle East
     Apr 5, 2007
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A steady squeeze on Tehran
By Amandeep Sandhu

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As the conflict over the British hostages held by Iran plays out, another conflict is taking place in the boardrooms of banks and oil companies. The United States is leading a quiet charge, focusing

on the Iranian financial and energy sectors.

While the US has had sanctions in place against Iran since the Iranian revolution in 1979, there is a new, pointed sanctioning aimed at starving Iran of capital. The US is waging a quiet campaign on the Iranian economy by starving it of capital by pressuring global oil companies and financial institutions.

Oil companies targeted
The US is increasing pressure by targeting the investment of foreign oil companies in Iran's oil and gas sector. While the US has objected to investments in Iran's energy sector for a long time, it has become energetically active in countervailing all energy investments in the past few months.

During the first two days of February, Iran convened a conference in Vienna to offer 17 new oil blocks on the market. In the two weeks leading up to the conference, US officials intensively lobbied oil and gas companies not to invest in Iran. Despite these efforts, more than 200 representatives from 59 different non-US international companies attended the conference. [1]

In the week preceding the conference, Anglo-Dutch Shell and Spanish Repsol co-signed a US$10 billion agreement based on a framework agreed in 2004 for the development of the South Pars gas field. A US State Department spokesperson responded by indicating an investigation of Shell. Shell, in turn, reiterated the legality of the deal under European law while warning investors that it might face sanctions in the US. [2]

The French company Total SA - which also participated in the Vienna conference - indicated that although it is listening to the US arguments, the company is not obliged to respect US law. [3]

In February also, the US ambassador to Spain, Eduardo Aguirre Jr, met with Repsol executives to warn them about the "delicate situation" about investing in Iran. While Aguirre did not call for the cancellation of the deal that Repsol had co-signed with Shell, he did call for a delay until the financial pressure on the Iranian regime results in a change in regime behavior. [4]

Brazilian Petrobras along with Repsol began partnering with the National Iranian Drilling Co in drilling three oil wells in February. The eventual aim of the project is a $470 million drilling contract. During a meeting with Petrobras's president, the US ambassador to Brazil, Clifford Sobel, warned of complications for Petrobras's US operations in the Gulf of Mexico if the company went ahead with the Iran project. [5]

Subsequently, the issue was raised by the United States at the Brazil-US meeting last Saturday, with President Luiz Inacio Lula da Silva reaffirming Brazil's right to pursue commercial activities in Iran.

Last month, Daniel Sullivan, the US assistant secretary of state for economic, energy and business affairs, met with Norwegian Oil Minister Odd Roger Enorksen to talk about Norwegian investments in Iran. Statoil, the largest Norwegian company, has held talks with US officials about investments in Iraq. Subsequently, in its filing with the US Securities and Exchange Commission, Statoil indicated that it could be sanctioned for the 2002 deal in which it received 37% of the South Pars gas license. Since the end of last year, Statoil has invested $394 million in the project. The Norwegian oil minister, however, indicated that the decision to invest in Iran is a commercial one to be decided by the company rather than the Norwegian government. [6]

In January, Malaysia's SKS Ventures signed a $16 billion agreement to develop two Iranian gas fields, Golshan and Ferdows. In return, a subsidiary of SKS offered Iran a $2 billion share in a refinery it is constructing in Malaysia. [7]

Although Tom Lantos, chairman of the US House of Representatives Foreign Affairs Committee, is pressuring the Bush administration to stop the ongoing free-trade-agreement talks with Malaysia, the Malaysian government has stood behind Iran investment.

Lantos is also unrelenting in pressuring the Indian government to cancel the $7 billion Iran-Pakistan-India (IPI) gas-pipeline project. Both US Ambassador to India David Mulford and recently Samuel Bodman, the visiting US secretary of energy, have warned the Indian government about the IPI project. Subsequently, however, Indian Defense Minister Pranab Mukherjee has indicated that the pipeline project will proceed.

The US has also issued warnings to China, Japan and Pakistan to desist from investment in Iran. Japan's Nippon Oil, the largest oil importer from Iran, has indicated that it will reduce the amount of crude imported from Iran by 15%. [8]

Pressure on banks and divestment
The second point of pressure on Iran is via cutting off Iran from the global financial system by pressuring banks and businesses. Last September, the US cut off one of largest Iranian banks, Bank Saderat, from access to the US financial system. In January another Iranian bank, Bank Sepah, was designated as helping proliferation of weapons of mass destruction and was cut off from the US financial and commercial system.

It is one thing to cut off banks from the US financial system, but this in turn forces other banks to cut off their connections with Iranian businesses, as these banks do not want to risk their own access to the US-centered global financial system. And they have been pushed along by a campaign begun last July in which US Treasury officials met with more than 40 banks to pressure Iran. Most of these banks have since either completely cut off business with Iran or rolled back their exposure. [9]

In a recent Dubai conference attended by the heads of Middle East businesses, US Under Secretary for Terrorism and Financial Intelligence Stuart Levey warned the businesses to worry about the risks of doing business with Iran. Levey, whom neo-conservative Frank Gaffney praises for pursuing "Reaganesque economic and financial measures" [10] against Iran, hailed the

Continued 1 2 

A Falklands War in the Persian Gulf (Apr 3, '07)

Iran-US: Fighting fire with fire (Apr 3, '07)

Iran being hit in the pocket (Jan 23, '07)


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