Iran says Chinese state oil firm withdraws from USD5B deal

China’s state oil company has pulled out of a USD5 billion deal to develop a portion of Iran’s massive offshore natural gas field, the Islamic Republic’s oil minister said yesterday, an agreement from which France’s Total SA earlier withdrew over U.S. 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 President Donald Trump’s unilateral withdrawal of the U.S. from the deal.

It also comes as China and the U.S. 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 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.

Officials in Beijing didn’t immediately acknowledge their decision. Phone calls to the CNPC rang unanswered on yesterday and its website bore no mention of the withdrawal.

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

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

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% stake, with CNPC getting 30% and the Iranian firm Petropars getting 19.9%. With Total’s withdrawal, CNPC had taken over the French firm’s stake. Now Petropars will develop the field alone, Zangeneh said.

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 U.S. 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 U.S. sanctioned Chinese shipping firms it said were ferrying Iranian crude oil.

There also have been a series of attacks across the Middle East that the U.S. blames on Iran. Tensions reached their height on Sept. 14, with a missile and drone attack on the world’s largest oil processor in Saudi Arabia and an oil field, 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.” Nasser Karimi & Jon Gambrell, Tehran, AP