Region | Iran
US feels the heat after Iran-Switzerland $42b gas deal
Washington fears it will lead others to confirm investments with Tehran and France's Total could follow Bern's lead.
- By Daniel Dombey, Anna Fifield and Haig Simonian, Financial Times
- Published: 00:30 May 2, 2008
Washington/Tehran/ Zurich The US and its allies are worried that the sanctions regime against Tehran is under threat from a possible new wave of European investment in Iran's strategically important gas sector.
Tehran has already concluded gas deals with Chin-ese and Malaysian companies - ending a protracted lull in investment in its energy sector and has alarmed Washington by reaching an agreement with a Swiss group. The dilemma threatens to expose the limited US influence over foreign companies' strategic decisions.
Although Washington and its allies have convinced the United Nations Security Council to sign up to three sets of sanctions against Iran's nuclear and missile sectors and banks, it has been unable to broaden such international measures into the key energy sector.
Until recently, informal US pressure - combined with the difficulties associated with doing business in Iran, had appeared to dissuade many companies from signing formal contracts. Now, the US fears that a 25-year supply agreement concluded in March between Elektrizitäts-Gesellschaft Laufenburg (EGL) of Switzerland and Iran could encourage other deals, particularly in the gas sector, despite American calls for tougher sanctions against Tehran over its controversial nuclear programme. The Swiss government says the deal could be worth up to $42 billion (Dh154.24 billion).
"The worry is that the Swiss deal will lead others, such as the Austrians, to confirm energy investments in Iran, and that companies like [France's] Total could then follow suit and sign contracts of their own," said one western diplomat.
He pointed out that the EGL agreement ended a period in which European energy companies had largely confined themselves to agreeing only non-binding memoranda of understanding with Iran.
He added: "There is a lot of attention on sanctions on Iranian banks, but investment in the energy sector is much more important for Iran's economy."
Iran has the world's second-largest proven gas reserves, but exports far below its potential.
So angry is Washington about the Swiss deal that it has suggested that Switzerland's role as the US representative in Cuba and Iran could be at risk.
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