Iran’s First Major Post-Deal Oil Contract Is Risky Business

Iran last week struck its first major oil agreement with international firms following the lifting of nuclear-related sanctions pursuant to last summer’s nuclear deal. The National Iranian Oil Company (NIOC) reached a tentative $4.8-billion agreement with France’s Total, the China National Petroleum Corporation (CNPC), and state-owned Petropars to develop a new phase of South Pars – the world’s largest gas field. What appears to be a tempting business opportunity, however, also raises considerable risk, potentially making foreign firms complicit in Iran’s illicit technology and military proliferation.

In 2010, the U.S. Treasury sanctioned Petropars to rein in revenue Tehran was using to fund its nuclear program. In January, as part of last year’s nuclear agreement, Washington lifted this designation as well as all energy-sector sanctions, even as that sector remains dominated by actors that help expand the Iranian leadership’s business empire, which finances terrorist groups and militias abroad, supports mass slaughter in Syria, and facilitates procurement of ballistic missile technology. Just last month, the Oil Ministry awarded the Execution of the Imam Khomeini’s Order (EIKO), a giant conglomerate controlled by the supreme leader, with a $2.2-billion energy contract, and offered the IRGC’s engineering arm a no-bid oil contract as well.

Contracts in the energy sector underscore risks that sensitive technology will be transferred to Iranian actors with a record of illicit activities. The Total-CNPC-Petropars contract is no exception: While the preliminary contract awards Total 50.1-percent ownership and CNPC 30 percent, Total has agreed to transfer technology to Petropars, and there are risks the latter could share dual-use French materials and equipment with other Iranian entities. Many such materials could be used in a ballistic-missile program.

Moreover, corruption is a risk in any emerging market, but particularly so in Iran. Total should require no reminder of that fact: In 2013, it agreed to pay some $400 million to settle U.S. criminal charges related to a $60-million bribe it paid to Iranian officials.

Petropars’ status as a parastatal entity, Iran’s history of corruption and market manipulation, and the risk of technology proliferation should raise concern among those worried about enriching Iran’s most dangerous state actors. French and EU authorities must enforce dual-use control measures. The U.S. Treasury, Department of Justice, and Security and Exchange Commission must closely watch this contract to ensure Total abides by the Foreign Corrupt Practices Act, and that Petropars does not aid and abet Iran’s illicit procurement.

Saeed Ghasseminejad is an associate fellow at the Foundation for Defense of Democracies, where Amir Toumaj is a research analyst. Follow them on Twitter @SGhasseminejad and @AmirToumaj