In downtown Tehran, the German electronics powerhouse Siemens AG opens and closes for business each day. But since 2010, no new business has been done there. "You walk in the door and the staff will tell you, 'We are keeping the office open until the Iranian sanctions are lifted,'" says Michael Tockuss, managing board member of the German-Iranian Chamber of Commerce Association, in Hamburg, Germany. "People forget that many companies, like Siemens, have a history with Iran that goes back more than 100 years. They stick to the rules, but they keep up the relationship."
For Big Oil, the payoff for keeping up the relationship could be enormous, which is why oil multinationals are discreetly, but assiduously, courting Iran's oil ministry. The Islamic Republic possesses almost 10 percent of the world's crude oil reserves and nearly one-fifth of gas reserves, behind only Russia. In 2012, the United States started cracking down on foreign companies doing business with Iran. Since then, Iran's oil sector has hemorrhaged an estimated $1 billion a day, with many of its energy resources left untapped and underdeveloped.
Even with global powers racing to finalize a deal for a nuclear détente before the June 30 deadline, it is becoming increasingly evident that, for U.S. allies, including all of those participating in the ongoing nuclear talks—France, Germany, the U.K., Russia, China and the European Union—that is proving too long to wait. "There has been a lot of preparation by companies looking to get back into Iran, and it's been going on for months," says Mark Dubowitz, executive director of the Foundation for Defense of Democracies, a nonpartisan policy institute in Washington, where he leads projects on Iran, sanctions and nuclear nonproliferation. "Western companies are loath to put anything on paper, but they are getting into position, just waiting and anticipating. They're all very eager to get back in."
The situation puts oil majors in a delicate position: How can they manage to be first at the feeding trough when a deal gets inked while not violating international sanctions that forbid most types of business with Iran, under threat of penalties that could amount to billions of dollars?
Iranian officials have indicated that Royal Dutch Shell, Italy's Eni SpA and France's Total SA have met with Iran's oil minister. Iran has invited the U.K.'s BP PLC, along with U.S.-based ConocoPhillips and Chevron Corp.—companies with which it has had prior relationships—to discuss energy projects. At the same time, China has been importing hundreds of thousands of barrels of Iranian oil a day, while Russia just lifted the Kremlin's ban on an arms deal with Iran that would deliver an advanced missile system that can engage 30 aircraft at once.
The early overtures, Dubowitz says, give weight to concerns that multilateral sanctions designed to discourage Iran from pursuing a nuclear weapon are already being tested and even undermined. Such moves weaken the hand of the West while it's still at the deal table. If a deal fails, it may even mean some sanctions get diluted or dropped. "Russia, in particular, is violating a commitment it made," Dubowitz notes, calling the lifting of its arms ban in conjunction with an oil-for-food program (also announced in April between the two countries) a "very sophisticated" sanctions workaround.
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