Iran Economy NewsSanctioned Iran group pulls out of gas project

Sanctioned Iran group pulls out of gas project

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Wall Street Journal: The engineering arm of Iran’s Revolutionary Guard Corps said Friday it was pulling out of projects in a giant Iranian natural-gas field, blaming mounting sanctions from the West.

The Wall Street Journal

By BENOîT FAUCON

LONDON—The engineering arm of Iran’s Revolutionary Guard Corps said Friday it was pulling out of projects in a giant Iranian natural-gas field, blaming mounting sanctions from the West.

The decision is a blow to a push by President Mahmoud Ahmadinejad to tighten control of the oil and gas industry and suggests a round of fresh international sanctions specifically targeting the IRGC, a paramilitary organization with a range of business subsidiaries, is causing new difficulty for the group.

It isn’t clear what effect the move would have on the giant natural-gas project known as South Pars. Tehran has struggled to recruit foreign partners in the project for years. Iranian officials need foreign capital and know-how to develop the gas reserves, but they have seen the world’s biggest oil producers shy away from preliminary commitments to get involved.

Foreign hesitation has heightened over the last year, as the Obama administration threatened to enact fresh economic sanctions on Iran to curb its nuclear program if Washington didn’t make progress diplomatically.

As big international companies stayed on the sidelines, domestic companies including some affiliated with the IRGC said they could fill the void.

But the Revolutionary Guard now appears to be backtracking somewhat after the United Nations, the U.S. and the European Union all have moved recently to enact fresh sanctions targeting companies affiliated with it.

The move by the Guard’s engineering arm, Khatam al-Anbiya, to back out of South Pars may help protect the wider project—or individual foreign partners—from falling foul of the new sanctions.

“Recently, in an oppressive action by the West, Khatam al-Anbiya has been slapped with sanctions,” the company said on its website.

In 2006, Khatam al-Anbiya got contracts worth a combined $2.09 billion to develop two phases of the South Pars gas field. The deals were part of a string of projects—from petrochemical plants to oil drilling—awarded to the group after the election of Mr. Ahmadinejad in 2005.

The Iranian president also secured the appointment of former IRGC official Masud Mirkazemi as oil minister last year, and an Ahmadinejad loyalist recently took the helm of the National Iranian Oil Co.

Last month, Khatam al-Anbiya was specifically named by new U.N. sanctions imposed against Iran over its nuclear program. The IRGC and Khatam al-Anbiya had already been named in previous, unilateral, U.S. sanctions.

The West suspects Iran’s nuclear program has military aims, while Iran says it is peaceful. The EU says Khatam al-Anbiya’s subsidiaries were heavily involved in the construction of an Iranian uranium enrichment site in Qom.

There have been other indications recently of a retreat by the IRGC from the oil patch, amid the new sanctions push. Last month, Khatam al-Anbiya failed to win the bulk of the $21 billion in contracts awarded to domestic companies to develop South Pars. That surprised observers because Iranian officials had predicted that the group would win the bids. Marine services company Sadra, which is partly owned by Khatam al-Anbiya, did get some contracts, however.

A spokesman for the company operating South Pars didn’t return a request for comment Friday on the reasons behind the pullout by Khatam al-Anbiya.

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