(Update) France's economic ties with Iran

"...With (Nicolas) Sarkozy as President, there has been a major shift in Frances stance towards Iran that may affect the entire European Union. For France there is no "bigger crisis" [2] at the moment than the one regarding a possible nuclear Iran..."

Backgrounder by Realite-EU

France, which has toughened its rhetoric against Tehran since President Nicolas Sarkozy took office in May, is pushing for stronger European Union sanctions against Tehran at the same time as negotiating a third round of U.N. sanctions [1].

With Sarkozy as President, there has been a major shift in Frances stance towards Iran that may affect the entire European Union. For France there is no "bigger crisis" [2] at the moment than the one regarding a possible nuclear Iran. Sarkozy is no President of restraint - he openly chose a tightened gait to confront the conflict with Iran.

French-Iranian economic ties

According to official statistics, the states standing against Iran obtaining nuclear weapons are in fact main trade partners of this state. France has deep economic relations with the Islamic Republic. In 2000-2006, the trade turnover between France and Iran, and French investment in Irans economy amounted to totally $30.2bn [3].
On September 28, 1997, Total signed a $2 billion deal for the first phase of the South Pars project, snatching the biggest oil deal with Iran since the Islamic Revolution in defiance of U.S. efforts to punish oil companies investing there [4].
Asked whether France would ask multinationals such as car manufacturer Renault or oil giant Total to suspend their activities in Iran, President Sakozys spokesman David Martinon said: "We are in contact with the French investors [5].
In 2004, Total formed a $2 billion venture with the government-owned National Iranian Oil Corporation and PETRONAS of Malaysia, known as Pars LNG. The aim of which is to produce 8 million metric tons of liquefied natural gas a year equal to about 15% of current world output [6].
Gaz de France purchased the documents of four hydrocarbon blocks offered to tender for exploration and development, announced the representative of Tehran-based office of the French company. He revealed that Gaz de France was thinking of meeting its European clients' need by purchasing Iranian gas. To this end, the French giant is holding negotiations with the National Iranian Gas Export Company (NIGEC) [7].
The Iranian oil minister, Vaziri-Hamaneh, said that Iran was still in talks with the French energy giant Total over the Pars oil project, which will be the first liquefied natural gas export terminal in Iran, although Total's estimate of the project's cost was above his expectations. Christophe de Margerie, the chief executive of Total, said that spiraling costs and geopolitical concerns could delay the company's planned involvement in the project, and that the cost had more than doubled. His comments came amid reports that the United States was pressuring the company to pull out [8].
Total signed a $2 billion deal for the first phase of the South Pars project in 1997, snatching the biggest oil deal with Iran since the Islamic Revolution in defiance of U.S. efforts to punish oil companies investing in the country [9].
The Total Group, one of the world's largest energy concerns, has long been involved in Iran, a country with 9 percent of the world's oil reserves and as much as 18 percent of its natural gas reserves. In 2004, it formed a $2 billion venture with the government-owned National Iranian Oil Corporation and Petronas of Malaysia called Pars LNG, which aims to produce eight million metric tons of liquefied natural gas a year, equal to about 15 percent of current world output.
Total executives in Paris would not comment on Middle East operations. A spokeswoman said the company employed 242 people on its Iran projects [10].
Sarkozy said that France was asking its own companies "to refrain from going to Iran." France already has recommended to its oil giant Total and its gas firm Gaz de France not to bid for new projects in Iran, and urged French banks to stop doing business there [11].
Sarkozy on Irans Nuclear Development
In his first major foreign policy speech as president of France, Nicolas Sarkozy said that Iran could be attacked militarily if it did not live up to its international obligations to curb its nuclear programme. Calling the Iranian nuclear crisis "the most serious that weighs on the international order today," Sarkozy also reiterated his position that a nuclear-armed Iran was "unacceptable" for France [12].

"Iran has better things to do than try to obtain nuclear weapons," Sarkozy said. "I want the Iranian leadership to understand this without a shadow of a doubt [13].
Sanctions on Iran
European governments are deeply divided over how far and how fast to go in imposing new sanctions against Iran. Britain and France, which initiated the call for joint European action, back tough new multilateral sanctions outside the U.N. Security Council [14]. France and Germany signaled on October 5, 2007, the European Union could punish Iran for pressing ahead with its nuclear program before the world's top powers agree on further sanctions at the United Nations [15].
Sarkozy is calling on Russia and China to support the toughened sanctions agreed in two earlier Security Council resolutions. If it fails to change Iran's behaviour and cause the suspension of uranium enrichment, Western government will arrive at a point where they must choose between, in President Nicolas Sarkozy's phrase, the "bombing of Iran or Iran getting the bomb [16]."

Sarkozy in an interview with the New York Times on September 21st, 2007, said: "Iranian research into military nuclear technology is putting the world at grave risk. This is unacceptable. (...) We strongly urge French companies to refrain from going to Iran as long as the international community has decided to apply sanctions. And if the sanctions are not enough, I would like there to be a third series of stronger sanctions, with the understanding that sanctions can only work if there is unanimity and so we must get everybody on board. [17]
On February 8, 2007, France changed its export credit policy towards Iran in a restrictive sense: we have decided to significantly reduce in 2007 our exposure limit on this country and to strengthen dramatically the conditions to grant these credits. And it is clear that this policy will remain under close scrutiny, depending on the evolutions of the nuclear crisis [18].
Germany and France have been slowly reducing banking exposure and government credit guarantees for exports to Iran, thus shrinking potential for losses in the event of a confrontation with Tehran. France's embassy in Washington said French banks reduced their exposure to Iran from $5.7 billion in December 2005 to $3.8 billion a year by the end of 2006 [19].

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[1] "Iran to France: sanctions wont stop atomic plans", Reuters, October 22, 2007

[2] "France talks about war, Die Zeit, September 19, 2007

[3] "Possible affects of U.S.-Iran war", Azeri Press Agentliyi, May 5th, 2007

[4] "FRANCE: Total CEO summoned by SEC on Iran deal", Reuters, April 3rd, 2007

[5] "France mulling non-UN sanctions against Iran", Agence France Presse, September 6th, 2007

[6] Borzou, Daragahi, Iran: First steps up its investment in Iran, The New York Times, June 23rd, 2004

[7] "Iran and Sinopec close to Yadavaran oil fiel deal", Reuters, April 9 2007

[8] "Gaz de France buys Iranian hydrocarbon blocks tender documents, IRNA, July 5th, 2007

[9] "Iran and Sinopec close to Yadavaran oil field deal", Reuters, April 9th, 2007

[10] Daragahi, Borzou: "Iran: France Steps Up its Investments in Iran," The New York Times, June 23rd, 2004

[11] Sciolino, Elaine; Smale, Alison: "Sarkozy clarifies Frances Iran policy", International Herald Tribune, September 24, 2007

[12] Sciolino, Elaine: "Iran risks attack over atomic push, French president says", International Herald Tribune, August 27, 2007

[13] Sciolino, Elaine; Smale, Alison: "Sarkozy clarifies Frances Iran policy, International Herald Tribune, September 24, 2007

[14] Wright, Robin: "Divisions in Europe May Thwart U.S. Objectives on Iran, The Washington Post. October 18, 2007

[15] Murphy, Francois; Krah, Marcus: "France, Germany keep EU sanctions pressure on Iran, Reuters, October 5, 2007,

[16] Blair, David: "Analysis: Irans political flux mirrored in US, Telegraph, October 29, 2007

[17] Interview with Nicolas Sarkozy, The New York Times, September 23, 2007

[18] Steep Decline in French Economic Ties to Iran, Fact Sheet compiled by the French Embassy, July 10, 2007

[19] Mufson, Steven; Wright, Robin: "Iran Adapts to Economic Pressure Washington Post, October 29, 2007

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(Update) France's economic ties with Iran

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