Great Gain or Scandalous Treason?: Political parties divided over Iran-Total contract
Last year, a final endorsement from the cabinet and the Majlis board that adjusts legislations by the administration with those of the parliament paved the ground for the signing of the MoU with French refinery company Total for the development of South Pars, phase 11. The contract was postponed due to election in Iran and the US.
Following the elections, giant European and Asian firms including Royal Dutch Shell, Total, CNPC, Lukoil, Sinopec, Petromina and OMV received Iran’s invitations to participate in tenders for the joint oil field Azadegan. The Italian Eni, one of the main sides in the development of the South Pars gas field in the 1990s, also returned to Iran’s oil industry after it signed an MOU for Kish and Darkhoveyn gas fields.
Total director made it clear that the giant was willing to take the risk of investment in Iran and would begin its South Pars project worth a billion dollar in the summer. The risks were those noted in the New York Times after the contract was signed between Iran and Total. The main risk lied in the fact the Trump administration, currently reviewing its Iran policy, could take a harsher approach toward Tehran, making international corporations unwilling to invest in the country.
However, the contract was signed a few days ago as Total's chief executive Patrick Pouyanné had promised. The contract has sparked a split between observers. The proponents find it a major step that could help bring foreign investors, presenting it as the fruit of the nuclear deal, with many positive impacts on the country’s economy. The opponents are already dubbing it as “Totalchay” or “Crescent 2”, in reference to previous contracts notorious for being against national interests.
Proponents of the contract are the same individuals, groups, and outlets that backed Rouhani’s reelection. On Wednesday morning for example, pro-reform Shargh daily printed an article which said: “Total’s partnership in Iran’s energy sector should not be seen as a simple event, it should be seen as a process which could have deep consequences for post-nuclear-deal developments in Iran’s economy. Given the risk of snapbacks, Total’s involvement in Iran’s energy market could establish the legal procedures needed by other European and Asian companies, despite the political risks that remain”.
Moreover, economic and political figures have declared their support for the contract. Energy pundit Narsi Ghorban wrote in Iran, the official organ of the Iranian administration: “during the past decade, even minor international energy corporations were unwilling to invest in Iran for two reasons despite initial interest in development of Iran’s oil and gas fields. The main reason for their unwillingness was numerous sanctions imposed by the EU and UN, in addition to primary US sanctions. On the other hand, the unattractive mutual sale contracts had failed to encourage investment in Iran’s oil and gas sectors, even before the nuclear sanctions and in years oil prices were above $100 per barrel. With the present contract starts an era of investment in and transfer of technology to Iran’s oil and gas industry, showing that the JCPOA has paved the way for investment in Iran’s hydrocarbon industry. On the other hand, the contract indicates that oil companies are interested in working with Iran within the framework of new IPC contracts.”
Comments from the director of Iran’s National Oil Company Ali Kardor are also remarkable. “With the contract signed, South Pars’ phase 11 will be capable of producing 2 billion cubic feet. When implemented, the plan is estimated to produce 335 billion cubic meters of strong, sour natural gas from the joint field in the 20-year period of the contract. This could produce about 290 million barrels of gas condensates, 14 million tons of liquid gas, 12 million tons of Ethane, two million tons of Sulfur as well as 315 billion cubic meters of light, sweetened gas. If we assume crude oil price at $50, the products extractable during the contract will be worth $23b, increasing our crude oil revenues to more than $84b,” Iranian media outlets quoted him as saying.
The opponents of the contract mainly find flaw in the provision of the deal and Total’s background. Most criticisms of the kind come from lawmakers, political and economic figures, and media outlets like Kayhan, Javan, Vatan Emrouz, Tasnim and Fars news agencies, that oppose the Rouhani administration.
“Even though the Total contract is confidential, the little information available about the IPC contracts could help investigate the harmful aspects of the deal to some extent. Ambiguities include Total’s 50.1 percent share vis-à-vis the Iranian side’s 19.9 percent share, which definitely violates Iran’s independence and sovereignty, particularly with a company that has previously violated contracts without paying compensation. What guarantees fines for the non-committed side?” Kayhan daily wrote. “It should be said that the Guardian Council has interpreted Principle 81 of the constitution to allow outsourcing projects only below 50 percent. Truly, why should not the contract be published?”
Tasnim news agency, affiliated with the IRGC, has also published an interview with energy expert Mohammad Javad Parsa who believes the contract overlooks certain precautions. “One is corrections noted in the appendix of the Supreme Leader’s letter [on IPCs], ignored in the cabinet vote. Furthermore, confidentiality contracts are signed beside the main contracts, which need Supreme National Security Council’s approval. However, the confidentiality agreement has not been approved by the SNSC, which is a violation of law on the part of the petroleum ministry,” Parsa told Tasnim.
Alireza Zakani is one of the opponents, too. “The contract is signed in the framework of IPC with a company that has a treasonous background against the Iranian nation. In a news conference held last year, I provided the media with the 70-page text of IPC, stressing that a disgraceful and corrupt contract will come out of it. I compared the main IPC text with the 13 pages approved by the Rouhani administration, noted its gross flaws and called its implementation a great betrayal against national interests. More gross is the fact that the illegal measure takes place under Mr. Zangeneh at a time France is offering all its potentials to treasonous Iranian Daeshites, the MEK, helping them to plot against the Iranian nation,” Zakani wrote in his Telegram channel.
The contract includes two legal partners, i.e. Iran and an oil consortium of three companies. According to the contract, the consortium will manage the oil field for 25 years. During the period, revenues will be divided on a 50-50 basis between the two sides. After the period, the management and revenues of the oil field are fully given to Iran.
The contract has many advantages for Iran. For instance, the consortium’s need for money transfer through international banks could resolve Iran’s banking problem. The technology used in building pressure-boosting rigs will reach Iran and extraction at levels close to that of Qatar will bring macro fortune.
The truth about shares in the contract is that the numbers discussed above, 50.1 percent for Total, 19.9 for South Pars and the rest for China, indicate the amount of investment by every side. The revenues will be equally divided between Iran and the consortium.
Moreover, the contract signed is an IPC, approved by the parliament, which does not transfer the ownership of the oil field and thus the ownership is in full control of Iran.