What's Really Behind French Oil Giant's Deal With Iran?

The $4.8-billion-dollar deal between Iran and France's Total, the huge multinational oil and gas company, has become very controversial. Considering the unilateral U.S. sanctions and increasing measures against Iran, why has Total risked signing such a deal?

There are a variety of possibilities.

Total will be developing phase 11 of Iran's mammoth South Pars gas field, the largest in the world, along with a state Chinese firm and an Iranian subsidiary. The project is set to render 2 billion cubic feet of gas per day, equivalent to 400,000 barrels of oil.

Iran's domestic market will receive the supply in 2021. The first stage is set to cost $2 billion, with an end price of up to $5 billion and production forecasted to start within 40 months.

As we speak, however, Washington continues to impose sanctions on Tehran and the Trump administration's comprehensive Iran policy has yet to be defined. Therefore, why did Total accept such a risk?

The mullahs' regime has provided numerous concessions in this deal, leaving Total believing the risk is worth taking. Iran also may receive no compensation in the case of Total deciding to abandon the contract. Ten years ago a similar contract was signed between Iran and Total, ending in the French company pulling out and not paying a dime in compensation.

Total most likely also received guarantees on Tehran paying any possible financial fines. And finally, considering the silence seen from Washington over this deal, there lies a possibility of the Americans providing a green light for its brokering.

Needless to say, U.S. Treasury Secretary Steven Mnuchin has emphasized that regardless of the policies adopted by Congress, the Trump administration will continue its own path of implementing sanctions on Iran.

The entire contract remains classified and the scenarios discussed above remain probabilities. What remains completely constant is the enormous scope of concessions provided by Iran. Rest assured all such actions were approved by Iranian Supreme Leader Ali Khamenei himself.

This is exactly why he has remained silent despite all the disagreements and discussions inside the regime. Iran's parliament has canceled any and all discussions in this regard. When handling major policy matters, Khamenei has the final word, similar to how it is said he blessed the Iran nuclear deal in a mere 20 minutes.

Both Iranian regime factions need to launch a major brouhaha in this regard. Members of Khamenei's conservative faction refer to the faults in slamming the faction loyal to President Hassan Rouhani.

The Revolutionary Guards (IRGC) is the main party concerned in this regard, as the Total deal leaves it out of earning any direct revenue. The Rouhani faction also seeks to boast their success, especially after gaining nothing from the Iran nuclear deal.

Economically, this $4.8 billion deal only provides for 2.5 percent of Tehran's investment needs. In the next five years, Iran will need around $200 billion in investments, according to the Oil Ministry. This deal provides for the only 1/40th of the amount.

Iran will drop from an oil exporter to becoming an oil importer if around $150 to $200 billion foreign investing are not realized in the next decade, according to the Iranian Parliamentary Research Center.

For comparison, U.S. President Donald Trump's recent visit to Saudi Arabia resulted in $380 billion in investments, consisting of $110 billion in arms contracts. However, they never went the limits to boast these feats as Iran has gone with a mere $5 billion deal.