US sanctions against Iran.
It is tempting to link Wednesday's missile test announcement by Iran and the statement the following day by French oil giant Total that it is not going to invest in a major gas project in the country because it is too risky.
However, the two are not directly related. Total's decision must have been reached some time before the Tehran test-fired the missiles - an event that is now a matter of dispute. The pictures are now claimed to have been doctored by the Iranians. But certainly, no serious corporation takes or announces major decisions on the back of a news story published only hours earlier. It would think long and hard first.
Total's decision may have been made following a realistic assessment of the situation on the ground - the war of words raging between Iran and the US over its nuclear intentions is enough to make any company operating there think hard about what it should be doing - but the "risk" to which Total refers is far more to do with the threat of litigation in American courts under the terms of the US' Iran Sanctions Act.
For most of its life, the 1996 act was largely symbolic. But last year, President Bush added further sanctions against Iran. The clear message was that his administration is going to clamp down on companies, foreign as well as domestic, that invest there. First signs of that were seen just three days ago when the State Department announced that it is going to investigate if Norwegian oil and gas company Statoil has violated US sanctions by helping develop Iran's natural gas sector. If that fails, Washington has an even powerful financial weapon in the wings against oil and gas companies operating in Iran. A bill is to be introduced in Congress ordering investors to disinvest from companies operating in the Iranian oil sector. The act will have potentially massive effect. Foreign companies with US subsidiaries could be targeted; so too, foreign companies doing business in the US.
Total's Iranian discomfort replicates that in Sudan where only now, 28 years after it was originally granted an exploration and production license, is it planning to start drilling. The north-south war and US sanctions put its plans on long-term hold. Although exploration now has the approval of the autonomous southern government in Juba, Total could still find itself in trouble. Human rights organizations in the US have said that they will use the law and campaign to force pension funds to disinvest from it if they are not satisfied with its conduct in the country.
The arm of the US law clearly stretches far. But there is one nagging question: How balanced will the long arm of US law be as an instrument of American foreign policy enforcement?
When Shell and Exxon quit Sudan in 1990 because of the difficulties in operating there, they were quickly replaced by the China National Petroleum Corporation as well as Malaysia's Petronas and India's ONGC. The Russians, the Chinese and other Asians will be only too delighted to step into the new Iranian void. But while Washington's legal threats have certainly led to European majors such as Shell, ENI, Repsol and now Total pulling back in Iran, is it prepared to take the Russian, Chinese or Indian companies to court, especially if they are state companies. It has to be doubted.
Washington's sanctions against Iran look as if they are going to hit only the US and its close allies. That does not seem a very intelligent policy.
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