TTE TotalEnergies SE

By Benoit Faucon 

LONDON -- European firms have started pulling back investment and abandoning commitments in Iran, responding to a decision last week to reimpose broad American sanctions on Tehran by year end.

Total SA, a French oil giant, said Wednesday it had halted work on an Iranian natural-gas project and warned it may have to pull out altogether from its plan to invest $1 billion in the field. Some shippers of Iranian oil have said they are ceasing to facilitate such trades because of the new sanctions. Insurance companies are studying whether they may have to reduce or stop their underwriting on the Islamic Republic's shipments.

Iran, which is the world's fifth-largest oil exporter and the holder of the second-largest gas reserves in the world, was seen as a huge investment opportunity for companies operating in the industry.

But last week, the U.S. said it would pull out of a deal that lifted sanctions on Iran in exchange for Tehran curbing its nuclear ambitions.

European allies have said they won't pull out or enact new sanctions, but many European firms -- with U.S. businesses, ties or bank accounts -- could be subject to Washington's sanctions enforcement. Trump administration officials have publicly warned European firms to start to wind down their dealings, but has given companies several months to exit Iran.

In response, Iran's oil minister Bijan Zanganeh accused U.S. president Donald Trump of working to favor American oil producers with the complicity of rival countries in the Organization of the Petroleum Exporting Countries.

Total, in a statement about its Iranian business on Wednesday, said U.S. banks account for 90% of its global financing, while 30% of its shareholders are American. "Total has always been clear that it cannot afford to be exposed to any secondary sanction, which might include the loss of financing in dollars by U.S. banks for its worldwide operations, " it said in its statement.

Total said it would seek a waiver from Washington for the gas project, but wouldn't continue with it if it didn't receive one. Total has also become a substantial buyer of Iranian crude in the past two years since sanctions were lifted. It had previously said it wouldn't seek an exemption for those purchases. It declined to comment beyond its statement.

In recent days, Wintershall AG, a German energy firm, told its Iranian partners it may not find funding for Iranian oil projects because it relies on its parent company, BASF AG, which has huge chemical operations in the U.S., according to a person familiar with the matter. A Wintershall spokesman said it strictly complies "with all national and international laws and regulations."

On Wednesday, Maersk Tankers AS, one of the world's largest oil-shipping companies, said it would stop taking assignments for Iranian oil shipments. It said it would wind down any existing customer orders by early November, the deadline set by Washington for the return of oil-related sanctions, a company spokesman said on Wednesday.

Torm AS, another Danish tanker company, has also "stopped taking new orders in Iran as a consequence of U.S. plans to reimpose sanctions on Tehran," a spokeswoman said.

Insurance companies are also tightening scrutiny over new underwriting. The U.S. sanctions "will have a significant impact on the availability" of insurance for Iran oil shipments, said Andrew Bardot, the executive officer of London-based International Group of Protection & Indemnity Clubs.

Mr. Bardot said the group -- a pool of reinsurers that covers around 90% of the world's tonnage, including tankers -- is in discussions with the U.S. government to mitigate the impact of returning U.S. sanctions on insuring Iran oil.

--Sarah Kent in London contributed to this article.

Write to Benoit Faucon at benoit.faucon@wsj.com

(END) Dow Jones Newswires

May 16, 2018 13:24 ET (17:24 GMT)

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