Nuclear Deal to Allow Iran to Create JVs with EU, US Companies

Iran and six major world powers reached a nuclear deal on Tuesday that could change the cards on the table of the European gas industry. Iran, which holds the second largest proven reserves of natural gas in the world after Russia, could soon benefit from the comprehensive lifting of all UN Security Council sanctions as well as multilateral and national sanctions.  

According to the speech by EU High Representative Federica Mogherini and Iranian Foreign Minister Javad Zarif, Iran will not seek, develop or acquire any nuclear weapon. In exchange of this commitment, Iran will enjoy the lifting of sanctions targeting trade, technology, finance, and energy. 

“We know that this agreement will be subject to intense scrutiny. But what we are announcing today is not only a deal but a good deal. And a good deal for all sides – and the wider international community” Mogherini and Zarif said at the conclusion of the negotiations.

At the moment, sanctions targeting Iran cover several sectors. For what concerns the oil and gas industry, sanctions are directed on import of oil and gas from Iran, on the import of Iranian petrochemical products, on the export of key equipment for the industry, on investment in the Iranian industry.  

The effects of the lifting of EU economic and financial sanctions are described in Annex 2. Speaking about the oil and gas industry, the following activities will be allowed from the implementation day: 

1. Import, purchase, swap or transport of Iranian crude oil and petroleum products, natural gas or petrochemical products and related financing;

2. Sale, supply, transfer or export of equipment or technology, technical assistance, including training, used in the sectors of the oil, gas and petrochemical industries in Iran covering exploration, production and refining of oil and natural gas, including liquefaction of natural gas, to any Iranian person, in or outside Iran, or for use in Iran; and

3. Granting of any financial loan or credit to, the acquisition or extension of a participation in, and the creation of any joint venture with, any Iranian person that is engaged in the oil, gas and petrochemical sectors in Iran or outside Iran. 

Similarly, the effects of the lifting of US sanctions will have positive repercussions on Iran too.  

‘Are part of the energy sector of Iran; purchase, acquire, sell, transport or market petroleum, petroleum products (including refined petroleum products), petrochemical products or natural gas (including liquefied natural gas) to or from Iran; provide to Iran support, investment (including through joint ventures), goods, services (including financial services) and technology that can be used in connection with Iran’s energy sector, the development of its petroleum resources, its domestic production of refined petroleum products and petrochemical products; or engage in activities with Iran’s energy sector, including NIOC, NITC, and NICO)’ reads the note released on Tuesday. 

Apart from Federica Mogherini, other European authorities welcomed the decisions.  

“If fully implemented, the agreement could be a turning point in relations between Iran and the international community, paving the way to new avenues of cooperation between the EU and Iran. Geopolitically, it has the potential to be a game changer” said European Council President Donald Tusk in a separate press release. 

US President Barack Obama and Iran's President Hassan Rouhani welcomed the deal, speaking about “hopeful world” and “constructive engagement”. According to Reuters, though, Israel said it would do what it could to kill a deal that it called an "historic surrender".

Iran has its sights set on resuming economic ties, especially in energy sector, with his number one European partner Germany after an increase in good imports. Iran’s Oil Minister Bijan Namdar Zanganeh visited Germany on May 7th after a large German economic delegation of more than 100 businessmen arrived in Tehran in late April to spur bilateral ties. Germany has increased good exports to Iran by 30% in 2014 to $2.4 billion due to easing sanctions since Novermber 2013, when Iran and P5+1 (US, UK, France, Russia, China+Germany) reached an interim nuclear deal.

Sergio Matalucci is an Associate Partner at Natural Gas Europe. He holds a BSc and MSc in Economics and Econometrics from Bocconi University, and a MA in Journalism from Aarhus University and City University London. He worked as a journalist in Italy, Denmark, the United Kingdom, and Belgium. Follow him on Twitter: @SergioMatalucci