Roundup: World Energy Giants Defy US Sanctions Against Iran

Energy-rich Iran has been immersed in jubilation over clenching of multi-million dollars worth of deals with world energy giants as the US Congress is resolved to keep stifling the Islamic republic.

The past two weeks have seen Italian and Japanese energy groups cutting deals with Iran on oil development, the moves viewed as a defiance of the US Iran-Libya Sanctions Act (ILSA).

The legislation, which appears certain to get extended at the US Congress, calls for sanctions on foreign firms investing in either country's oil and gas industries in an attempt to contain them.

The Italian energy group, Eni, signed a contract worth 1 billion dollars on June 30 to develop the Darkhuwain oil field in southwestern Iran, with 550 million dollars of investment from Eni within five and half years.

Eni's Chief Executive Officer Vittorio Mincato said, upon signing of the contract, that "the spirit of cooperation and the deep-rooted bonds of friendship between Iran and Italian Eni prevailed over every difficulty," which includes Eni's concern over possible punishment from the sanction-happy U.S..

Located in Khuzestan Province, the oil field is expected to pump 100,000 barrels per day (bpd) in the first phase and 160,000 bpd in the second phase.

Viewed as a tough test for US President George W. Bush to handle the ILSA, the Eni-Iran deal came just one month before the US Congress votes on the renewal of the law.

The act will lapse in August. But recent developments in Washington indicate the US Congress and the Bush administration are split over the number of years regarding the extension of the sanctions, with the White House favoring two years whereas the Congress preferring another five years.

While heated debates over the wisdom of the sanctions are heard inside the US, European and Asian oil companies have spared no efforts to secure their shares of reliable energy from Iran, which boasts the world's second largest proven gas reserves, next to Russia, and the third largest proven oil reserves, after Saudi Arabia and Iraq.

Following Eni, energy-thirst Japan has also started striding into Iran's energy market by securing its major role in developing the enormous Azadegan oil field in southwestern Iran, estimated to have 26 billion to 40 billion barrels of oil reserves.

During his eye-catching trip to Iran on Sunday, Takeo Hiranuma, Japan's international trade and industry minister, pursued Japan's role in developing Azadegan, putting Japan in a favorable position to tap oil from one of the biggest undeveloped oil field in the world.

Hiranuma, who is the first Japanese trade minister to visit Iran since the Islamic Revolution in 1979, told reporters that his country hopes to strengthen cooperation with Iran in oil development.

He took a view that the national interests override any consideration of U.S. pressure, saying that "we have created the necessary legal basis for our oil sectors to be able to participate in projects abroad without fear of U.S. opposition."

If inked, the Azadegan contract would be worth more than 8 billion dollars and would be the best gift Iran could ever offer to Japan, its main trade partner in Asia.

Production from Azadegan is expected to start in 2005, with the ceiling daily output of 800,000 barrels. Iran's success in attracting foreign investment is a setback for U.S. energy companies, which in recent years have pushed hard for the lifting or weakening of the sanctions on Iran.

The U.S. firms have lamented the ill-conceived sanctions which actually only denied their entrance to Iran's energy fields, while non-U.S. companies repeatedly cross the red line by grabbing what the U.S. companies are deprived of.

A double-edged sword, the sanctions have also cost the U.S. billions of dollars annually, according to reports released by some U.S. institutions. Besides, tens of thousands of American workers have lost their jobs, directly or otherwise, due to the sanctions.

Iran's newspaper Kayhan International on Thursday carried an editorial questioning the effectiveness of the "outmoded American commandment."

The hard-line daily challenged that "if the U.S. follows through with the threats implied in the sanctions, it runs the risk of losing its strategic allies."

As more non-U.S. companies, like Abbot Group, Britain's largest oil drilling contractor, eye for Iran's lucrative energy market, more deals would come up as political hot potatoes for the U.S. to handle.

To keep strangling Iran while isolating itself from its allies, or loosing bonds on Iran by making its energy accessible to all, the U.S. is to weigh carefully in limited days.






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