French oil major Total warned on Wednesday it will abandon a major gas field project in Iran unless it is exempt from USA sanctions against Tehran.
Total was the latest of several European companies to announce plans to withdraw from Iran after the U.S. Treasury gave foreign companies notice last week that they have three to six months to "wind down" their business with Tehran before they face possible penalties for violating U.S. sanctions.
Oil companies have been forced to reassess their investment plans in the OPEC producer, however, in the wake of the May 8 move by the United States to pull out of the worldwide nuclear deal with Iran and re-impose sanctions on the country.
The nuclear agreement, worked out by the USA under former President Barack Obama, together with five other world powers and Iran, lifted sanctions on Iran in exchange for limits on its nuclear programme.
Total said it could not afford to breach the looming U.S. sanctions against Iran due to its reliance on American banks and shareholders.
Total has been carrying out tenders for topsides, jackets, pipelines and other work since soon after receiving its $2 billion contract for the gas field in July 2017, but it has yet to make a final investment decision.
"It would be suicide to do any new business or funding for Iran or Iran-related companies without explicit guarantees from the US government". Total could also hand the project back to the Iranians who could then sell the interest to another nation.
The French state-backed oil group said that without an exemption from the U.S. it would halt work at the world's largest gas field and wind down all its activities by November 4. They could not afford to be sanctioned by remaining in Iran.
Total's announcement comes after German insurer Allianz and Danish oil product tanker operator Maersk Tankers said they were winding down their businesses in Iran.
The 28 European Union leaders meeting in Sofia said they did not make any quick decisions on how to try to shield their businesses so they can keep operating in Iran. However, officials with the company state that they will have to walk away from the project if they are not exempted from the new U.S. sanctions.
Total's move is likely to rattle European governments and the European Commission, which warned Trump against acting to punish their businesses operating in Iran under the legitimacy of the nuclear deal they helped broker.
The EU's top energy official, Commissioner Miguel Arias Canete, is heading to Iran for talks from May 18 to 21 to discuss ways of trying to overcome renewed US sanctions against Iran's oil industry.
"The current situation will pass and Iran will emerge as a victor", the oil ministry's news agency SHANA quoted Zanganeh as saying.