Just about everyone right now wants to know where President-elect Donald Trump stands on Iran, and what fate lies ahead for the nuclear deal and the easing of sanctions that have energy companies’ mouths watering—not the least of them oilfield services giant Schlumberger, which has just hedged its bets that sanctions are history despite heavy rhetoric to the contrary.
Schlumberger has signed a memorandum of understanding with the National Iranian South Oil Company for the development of oilfields in Iran’s southern Khouzestan province, making it the second Western energy major to return to Iran after the lifting of most sanctions.
According to the Iranian government, Schlumberger could be involved in up to three Iranian oil fields in an agreement that comes only two weeks after Norway’s DNO oil and gas company also signed an MOU on oilfield development in Iran.
But for Schlumberger, things aren’t that simple.
Just last year, Schlumberger was, for all intents and purposes, banned from investing in Iran for three years. The three-year probation period was part of the company’s plea bargain with the Department of Justice, after a six-year investigation that found the company guilty of having repeatedly violated sanctions against Iran and Sudan.
As part of the bargain, Schlumberger also agreed to a fine of US$155.1 million and gave up US$77.6 million in illegally obtained profits.
There is a way for Schlumberger to legally do business in Iran: the company is registered in the Caribbean and can export equipment to Iran, as long as it has not been manufactured in the U.S. and the company’s operations in the Persian Gulf country do not involve U.S.-based employees or employees who are U.S. citizens.
This deal, however, is not for the export of equipment. According to the Wall Street Journal, a spokesperson for Schlumberger said that the deal was “for the non-disclosure of data required for a technical evaluation of a field development prospect” and does not involve any oilfield services.
Even so, it might prove to be a challenging conundrum unless Schlumberger has struck a deal with the relevant authorities to amend its three-year probation conditions. Alternatively, it could possibly wait it out, since the current agreement with the NISOC is only a preliminary one.
There is a possibility that it will never move past the preliminary stage if President-elect Donald Trump goes ahead with his plan to strike down the deal that the West made with Iran last year, and which saw the country “scrap” its nuclear program in exchange for the removal of most economic sanctions.
The uncertainty has both sides on edge.
Trump has referred to the Iran nuclear deal and “one of the worst deals ever negotiated”, but reversing it is not a simple. Nonetheless, Trump has deemed this as his “number 1 priority”.
Trump has also surrounded himself with people who are also on record as wanting to roll back the Iran deal, including Rudolph Giuliani and John Bolton, not to mention the President-elect’s pick for CIA head, Mike Pompeo.
International companies have put their Iran plans on hold because of this uncertainty. As one analyst, RBC global head of commodity strategy, Helima Croft, put it: “The potential reinstatement of U.S. extraterritorial sanctions on Iran is one of the clearest policy implications of the Trump victory.”
But at the end of the day, pulling a U-turn on Iran will not sit well with Russia, with whom the President-elect has made pragmatic détente a cornerstone of his campaign.
The only question is, what will persuade Trump more: the benefit to U.S. security interests, cooperative relations with Russia to fight ISIS, or the “hawks he has surrounded himself with”, to borrow a title from the New York Times.
Schlumberger is clearly betting on the status quo as far as Iran is concerned, but the jury is still out in regard to future sanctions on Iran.
By Irina Slav for Oilprice.com
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