On the heels of the NIE release in December, European energy giants are flocking back to Tehran to sign lucrative deals. On December 22, Italian energy company ENI was reported to be ready to sign an important gas deal with National Iranian Gas Export Company (NIGEC), as its CEO, Nosratollah Seifi told the Farsi News Agency. Whatever the time frame of this deal, the signal is clear: CEO’s feel there is no war on the horizon and it is safe to invest in Iran. Nor is the road to EU sanctions open: many member states are against sanctions, fearful of losing important market shares to China and Russia, after it took European companies so many years and so much effort and capital to penetrate Iran’s markets.
Europeans make a reasonable case against sanctions, especially in the energy sector, citing the need for diversification of energy sources, calling engagement—both economic and political—a means to leverage on Tehran that Washington lacks, and claiming that a European withdrawal from Iran’s markets would only pave the way for Chinese, Russian and Indian competition to move in—with little impact on Iran’s economy. But the truth is that Europeans sell technology which few non-Western companies can currently match in quality and precision. Whether it’s building dams or tunnels, liquid natural gas (LNG) technology or fuel refinement, and with the Americans out of the game, European technology is hard to beat. This makes Iran vulnerable to European pressure.
Take gas, Iran’s biggest natural resource after oil. Though Iran sits on the largest single natural gas field in the world, most phases of production (both the ones that are operational and the ones being developed) rely on the know-how of European and other Western companies. With the partial exception of Phase 2 and 3—operated by TotalElfFina on behalf of the Russian Gazprom and the Malaysian Petronas—all other companies are either European or South Korean. If they were to withdraw, deny spare parts supply, stop importing extraction technology and refuse to build liquefaction facilities, Iran would be sitting on its gas forever, because it would take years before the Russians, the Chinese, and the Indians could replace European and other Western companies.
Europeans should look at Iran past their fantasies of a stable and powerful regime backed by a proud and patriotic nation: the Iranian state is 50 percent non-Persian, and the specter of revolt in the provinces is always around the corner. Pressure can be mounted to make this regime feel more vulnerable, knowing that, aside from being a powerful political signal, the withdrawal from Iran’s energy sector of Europe’s energy giants might have in the short terms momentous repercussions on Iran’s economy and the stability of its regime.
