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Iran isolation grows as France’s Total cancels $10bn South Pars gas field project

Times Online
July 11, 2008

Iran isolation grows as France’s Total cancels $10bn South Pars gas field project

Tehran faced deeper isolation yesterday after a major Western energy company withdrew from a giant Iranian gas field project and international threats to attack the country’s nuclear facilities grew.

Total, the French energy group, said that it was freezing its role in a $10 billion project to develop the South Pars fields in the Gulf, the world’s largest gas reserves. The decision was a big step in a US campaign to put pressure on Iran to stop enriching uranium.

Iran’s decision to carry out missile tests — with a second round yesterday — also prompted Ehud Barak, the Israeli Defence Minister, to suggest that his country was ready to launch a pre-emptive strike if necessary. “Israel is the strongest country in the region and has proved in the past that it does not hesitate to act when its vital security interests are at stake,” Mr Barak said. Tehran had said this week that Tel Aviv would be “set on fire” if Israel were to attack.

Iran’s warlike language led to a warning yesterday from Condoleezza Rice, the US Secretary of State. “We are sending a message to Iran that we will defend American interests and the interests of our allies,” she said.

Dr Rice, who was speaking in the former Soviet republic of Georgia, said that Iran’s missile tests justified US plans for an anti-missile shield with bases in Eastern Europe. Russia is strongly opposed to the plan. Total said that it was not cutting ties with Iran and would continue to export 15,000 barrels a day of hydrocarbons from its operations. The decision to put investment in Iran on ice is, however, an advance for the US-led push for sanctions. It underlines Iran’s isolation as it persists in its nuclear programme and will slow its drive to exploit the largely untapped South Pars reserves it shares with Qatar.

Washington has put pressure on the French group after Shell and Repsol, the Spanish company, withdrew from other Iranian projects this year.

Tehran needs technology that only the Western groups possess in order to extract and liquefy gas from the field. It could turn to Gazprom but the Russian energy giant lacks the necessary expertise, industry experts said.

Russia may also not be keen to help Iran to create a rival to its own domination of Western Europe’s gas supplies. Tehran expected South Pars to produce 751 million cubic metres (26 billion cubic feet) of natural gas a day when completed by 2014.

Total had been hoping to continue with South Pars, which has been in suspension since 2006, but it bowed to pressure from Washington and from President Sarkozy, a strong supporter of the drive to force Tehran to stop enriching uranium. Total was not given an order but it was told further involvement in Iran would be unwelcome.

“The political context made it unfavourable to continue,” Burkhard Riuss, a Total spokesman, said. Christophe de Margerie, the chief executive, said that his company intended to maintain its relations with the Iranian National Oil Company but could not risk being pilloried for doing new business there. “Total’s decision was not a surprise,” Francis Perrin, director of the Arab Centre for Oil Studies in Paris, said. “It was difficult for Total to shrug off this pressure.”

Mr Sarkozy has become as outspoken as President Bush in his belief that Iran is developing nuclear weapons. In Israel last month he told the Knesset: “We have no choice but to reinforce Iran’s isolation with new UN and EU sanctions . . . and with the restraint of firms doing business with Iran.” Israel intensified speculation about a pre-emptive strike on Iran’s facilities with a practice attack last month. In Japan this week the leaders of the G8 sought to calm the atmosphere, calling on Tehran to negotiate. They dispatched Javier Solana, the EU’s foreign policy chief, to Tehran for talks on July 19.

Mixing their signals Iranian leaders also said that they were ready to compromise. In Washington Robert Gates, the US Defence Secretary, said: “There’s a lot of signalling going on, but everybody recognises what the consequences of a conflict would be.”

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