French energy giant Total joined other major European companies in saying they will exit Iran unless U.S. sanctions are waived, casting a shadow over efforts by European leaders to salvage the Iran nuclear deal.
EU leaders at a summit in the Bulgarian capital of Sofia late on May 16 reaffirmed their commitment to trying to keep the landmark 2015 agreement alive and protecting European companies doing business in Iran.
But Total's announcement and similar ones by German insurance giant Allianz and Danish tanker giant Maersk earlier this week illustrate the major obstacles they face trying to overcome renewed U.S. sanctions on Iran.
Total said it will pull out of a billion-dollar project to develop Iran's huge South Pars natural gas field by November 4 unless it can secure a exemption from the renewed sanctions imposed as a result of President Donald Trump's decision with withdraw from the nuclear deal.
Tehran has repeatedly hailed the Total project as a symbol of the nuclear accord's success at helping to revive and modernize Iran's critical oil and gas industry, which drives the country's economic growth and generates much of the government's revenues.
Total was the first major European company to resume business in Iran after sanctions were lifted in 2016 in exchange for curbs on Iran's nuclear activities.
Total's withdrawal would be a blow to President Hassan Rohani, who had hoped its prestigious project would make other international businesses regain confidence in Iran and bring in investment.
Iran did not immediately comment on Total's announcement.
Total was the latest of several European companies to announce plans to withdraw from Iran after the U.S. Treasury gave foreign companies notice last week that they have three to six months to "wind down" their business with Tehran before they face possible penalties for violating U.S. sanctions.
The United States in the past has fined European and Asian banks and businesses billions of dollars for violating its sanctions. It most recently imposed such stiff penalties on China's ZTE technology giant that the firm has said it will be forced to go out of business unless it gets a reprieve.
The U.S. sanctions essentially force most global companies to give up doing business in Iran if they want to continue operating in the United States.
Total said the South Pars project puts at risk the company's large operations in the United States and reliance on U.S. banks for financing of 90 percent of its operations.
“The risks of being on the wrong side of the U.S. government are not worth the benefits of trading with Iran, once the sanctions are in place,” said Jason Gammel, an analyst at Jefferies LLC.
Germany's Allianz, an insurance giant with a major presence in the United States, said it intends to wind down what it called its "totally minimal" business in Iran.
Denmark's Maersk Tankers, a major global shipping company whose oil tankers help carry Iran's oil exports to Asian markets, has also announced that it will wind down its business with Iran by November.
Another Danish oil tanker operator Torm has said it would stop taking new orders in Iran.
The 28 EU leaders meeting in Sofia said they did not make any quick decisions on how to try to shield their businesses so they can keep operating in Iran.
European Commission head Jean-Claude Juncker presented options to protect European investment, which include retaliatory sanctions, allowing the European Investment Bank to invest in Iran, and providing euro-denominated credit lines for Iran.
But their efforts are undermined by the global reach of the U.S. financial system, the dominance of the U.S. dollar, and the value to most European companies of the vital markets they have cultivated in the United States.
European leaders are scrambling to find ways to protect their businesses because Iran has warned that it may start enriching uranium again if it no longer experiences any economic benefit from continuing to honor the nuclear deal.
Iran has asked European leaders to provide "guarantees" that the economic benefits from the deal will continue to flow -- something European Union foreign policy chief Federica Mogherini said would be difficult to do on May 15.
But Mogherini said the EU would make every effort to maintain business ties with Tehran and ensure that Tehran can continue to sell its oil around the world.
The EU's top energy official, Commissioner Miguel Arias Canete, is heading to Iran for talks from May 18 to 21 to discuss ways of trying to overcome renewed U.S. sanctions against Iran's oil industry.
Iran's oil minister Bijan Zanganeh said on May 16 that Tehran would survive the renewed sanctions.
"The current situation will pass and Iran will emerge as a winner," the oil ministry's news agency SHANA quoted Zanganeh as saying.