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China National Petroleum Corp has pulled out of a deal to develop Iran’s South Pars field. Photo: AP

Chinese state oil firm withdraws from US$5 billion deal, Iran says

  • South Pars field agreement, struck after Iran’s 2015 nuclear pact, appears to be latest business casualty of US pressure campaign on Tehran
  • French oil company Total SA pulled out of project earlier due to US sanctions on Iran

China’s state oil company has pulled out of a US$5 billion deal to develop a portion of Iran’s massive offshore natural gas field, the Islamic Republic’s oil minister said on Sunday, an agreement from which France’s Total SA earlier withdrew over US sanctions.

The South Pars field deal, struck in the wake of Iran’s 2015 nuclear deal with world powers, appears to be just the latest business casualty of America’s pressure campaign on Tehran following US President Donald Trump’s unilateral withdrawal of the US from the deal.

It also comes as China and the US engage in their own trade war, as Beijing and Washington levy billions of dollars of tariffs on each other’s goods.

Oil Minister Bijan Zangeneh, quoted by the ministry’s SHANA news agency, said on Sunday that the China National Petroleum Corp. was “no longer in the project.” He did not elaborate or give any reason for the withdrawal, though SHANA said the company “had pulled out of a contract” to develop the field.

The logo of China's largest oil producer, state-owned China National Petroleum Corp. Photo: AFP

Officials in Beijing did not immediately acknowledge their decision. Phone calls to the CNPC rang unanswered on Sunday and its website bore no mention of the withdrawal.

However, Iranian Foreign Minister Mohammad Javad Zarif separately complained on Sunday about the US campaign against Tehran and its impact on foreign investments.

“We have been facing plenty of problems in the field of investment because of the US maximum pressure policy,” Zarif told a parliamentary committee, according to the semi-official Tasnim news agency. “We are trying to remove the problems.”

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Tehran-based political analyst Saeed Leilaz said he believes that despite China’s departure from the project, “China will remain Iran’s main trade partner.”

Leilaz said that’s because a large portion of past oil revenue from China has remained in the country, enabling Tehran to buy goods it needs from China without transferring money from Iran, thereby evading US sanctions on Iran’s banking system.

Iranian oil minister Bijan Zangeneh said China National Petroleum Corp was “no longer in the project”. Photo: EPA

Iran holds the world’s second-largest known reserves of natural gas and the world’s fourth-largest oil reserves.

Much of its natural gas comes from its massive South Pars field, which it shares with Qatar. The initial plan for the development of South Pars involved building 20 wells and two wellhead platforms, a project that would have a capacity of 2 billion cubic feet of natural gas a day.

Under terms of the initial deal, Total was to have a 50.1 per cent stake, with CNPC getting 30 per cent and the Iranian firm Petropars getting 19.9 per cent. With Total’s withdrawal, CNPC had taken over the French firm’s stake. Now Petropars will develop the field alone, Zangeneh said.

Iranian Foreign Minister Javad Zarif complained on Sunday about the US campaign against Tehran and its impact on foreign investments. Photo: Reuters

Total first pulled out of Iran in 2006 as United Nations sanctions first took hold over fears Iran’s atomic program would be used to build nuclear weapons. Tehran has maintained its program is only for peaceful purposes. Iran cancelled another CNPC contract in 2012 amid increasing international sanctions which led to the 2015 nuclear deal.

After withdrawing from the nuclear deal with Tehran over a year ago, the US imposed sanctions on Iran that have kept it from selling its oil abroad and have crippled its economy. Iran has since begun breaking terms of the nuclear deal. In late September, the US sanctioned Chinese shipping firms it said were ferrying Iranian crude oil.

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There also have been a series of attacks across the Middle East that the US blames on Iran. Tensions reached their height on September 14, with a missile and drone attack on the world’s largest oil processor in Saudi Arabia and an oilfield, which caused oil prices to spike by the biggest percentage since the 1991 Gulf War. While Yemen’s Iranian-allied Houthi rebels claimed the assault, Saudi Arabia says it was “unquestionably sponsored by Iran.”

Iran denies being responsible and has warned any retaliatory attack targeting it will result in an “all-out war.”