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Iranian energy sectors is increasingly losing power

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Iranian energy sectors is increasingly losing power, despite the expectations that oil and gas industry would speed up after the nuclear deal. The international oil companies do not have access to the country after President Trump’s administration threatens to abolish the 2016 deal and reintroduce petroleum sanctions in exchange for a restriction on Iran’s nuclear program.
The Iranian representatives expected the deal to lead to new 10 billion USD in foreign spending per year for the oil and gas sector. In the last two years, however, only 1.3 billion USD have been injected into the industry, mainly from China.
After its initial rise, the oil production capacity remained at 3.85 million barrels per day, according to the International Energy Agency, which is well below the different estimates of Iran over the years. The French Total has signed a 1 billion USD deal, which has been cited as a start for Western investment, but remains the only one to be developed.
The companies such as the British oil company BP, the French energy group EDF Group and the German Wintershall are not so prone to enter the market because they have activities in the US that can be affected if sanctions are imposed again.
The oil industry was expected to be the easiest for recovery of the Iranian economy, after nearly a decade of sanctions curb exports of crude oil. Iran has the fourth largest oil reserves in the world and the first by natural gas assets – much of which is currently not working. Major oil companies like BP have a long experience in Iran, the expertise to get oil sometimes difficult geology and the desire to return under certain conditions.
Iranian officials recognize that foreign investment is returning slower than expected, accusing the US of intimidating fear and insecurity.
Trump put the May 12 deadline for the nuclear deal to be corrected, or will take over in a direction that could mean a resumption of sanctions on Iran’s oil sales.
The country has indeed made some economic relief after the lifting of the sanctions, as the export is growing by almost half a million barrels per day, and Chinese investment are pouring into the business. These barrels helped avoid financial meltdown, supported the economy grow and alleviated the high inflation.
However, the anemic recovery has brought a lot of disappointment for the citizens. Economic anxiety was the initial reason for widespread protests this year, which transformed into widespread condemnation of Iran’s ruling system.
Forecasts are that the economic growth of the country will slow to 4.2% this fiscal year from 6.6% an year earlier, according to estimates by the International Monetary Fund, which refers to stagnation in oil production and uncertainty around the nuclear deal.
The US still prohibits all dollar transactions with Iran, which further complicates things as oil is traded in dollars. Big banks are reluctant to provide funding for Iranian deals.
The French energy giant Total has assembled a group of little-known banks from China, France and Italy to transfer money for a project and increase production from the largest coastal gas field in Iran.
Iranian hardliners, at the same time, are trying to limit foreign investments.