Economy Russian, Western Oil Companies Considering Re-Entering Iranian Market

Russian, Western Oil Companies Considering Re-Entering Iranian Market

Russia's President Vladimir Putin (R) shakes hands with an employee as he visits a fuel filling complex operated by Rosneft, the state-owned oil company.
Russia’s President Vladimir Putin (R) shakes hands with an employee as he visits a fuel filling complex operated by Rosneft, the state-owned oil company.

Russian and western oil companies are keen on returning to Iran once sanctions imposed on the country are lifted, but it will require certain actions from Tehran, Russian trade representative in Iran Andrei Lugansky told RIA Novosti.

“The negotiations [regarding the return to Iran] are conducted by many European and western companies. They see the upsides of working with Iran: cheap workforce, cheap energy infrastructure in the country, protection of investments by the domestic legislation and tax exemption,” Lugansky said in a Wednesday interview.
According to the official, sanctions imposed on Iran by the United States and the European Union are not the only obstacle hindering the re-entry of foreign oil companies into Iran. The country’s laws are also in the way as, according to the country’s constitution, the Islamic republic owns all of the oil reserves on its territory and is prohibited to use oil fields under production sharing agreements.
“In other countries, if a big oil company decides to extract oil, part of it goes to the state, while the other part goes to the company. In Iran, any oil company has to give 100 percent to the state and then wait for the indemnification. They [Iranian authorities] are discussing possible ways to resolve the situation legislatively, in accordance with the production sharing principle,” Lugansky said.
He refrained from making predictions about how long the negotiations between international oil companies and Iran might take, pointing out the outcome depends on the companies.
“This issues concern not only Russian companies, but many western businesses … that, despite the sanctions, are willing to work with Iranian oil,” Lugansky said.
Last week, the National Iranian Oil Company (NIOC) said the country’s government would offer foreign investors new oil contracts totaling $40 billion in 2015. Several energy giants — Royal Dutch Shell, BP, Total and Russia’s Lukoil — have expressed interest in investing in Iran once sanctions on the country are lifted, Iranian officials said earlier.
The West suspects suspect Iran of developing a nuclear weapon under the guise of a civilian program. Tehran’s controversial nuclear activities have triggered the imposition of several rounds of sanctions on the country. In particular, the United States, the European Union, and a number of other nations have banned domestic businesses from entering into any energy, missile or financial agreements with Iran. These moves, along with other restrictions imposed on Iran’s oil and petroleum industry, have significantly hit the Iranian economy, which depends heavily on oil trade revenues.
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