Identifier
Created
Classification
Origin
07PARIS1065
2007-03-19 16:33:00
CONFIDENTIAL
Embassy Paris
Cable title:  

TOTAL DISCUSSES PROSPECTIVE IRANIAN INVESTMENTS

Tags:  ETTC EINV EPET FR IR 
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C O N F I D E N T I A L SECTION 01 OF 02 PARIS 001065 

SIPDIS

SIPDIS

STATE FOR EB/ESC, EUR/WE, EUR/ERA, NEA/NGA

E.O. 12958: 3/13/2022
TAGS: ETTC EINV EPET FR IR

SUBJECT: TOTAL DISCUSSES PROSPECTIVE IRANIAN INVESTMENTS


Classified by Econonomic Counselor Stuart Dwyer for Reasons 1.5
(d) and (e).

C O N F I D E N T I A L SECTION 01 OF 02 PARIS 001065

SIPDIS

SIPDIS

STATE FOR EB/ESC, EUR/WE, EUR/ERA, NEA/NGA

E.O. 12958: 3/13/2022
TAGS: ETTC EINV EPET FR IR

SUBJECT: TOTAL DISCUSSES PROSPECTIVE IRANIAN INVESTMENTS


Classified by Econonomic Counselor Stuart Dwyer for Reasons 1.5
(d) and (e).


1. (C) On March 8, Deputy Assistant Secretary for Energy,
Sanctions, and Commodities Paul Simons met with Total
Exploration and Production President Yves-Louis Darricarrere to
discourage Total's prospective energy sector investments in
Iran. Darricarrere said that Total would not make a final
investment decision on whether to participate in a liquefied
natural gas (LNG) project in Iran's South Pars field in the next
few weeks, and would consider all political and economic factors
before doing so. Certain elements of the project were not
progressing quickly, and the GOI, somewhat surprisingly, was not
pressuring Total to decide soon. End summary.


2. (U) On March 8, Deputy Assistant Secretary for Energy,
Sanctions, and Commodities Paul Simons met with Total
Exploration and Production President Yves-Louis Darricarrere to
discuss Total's prospective investments in Iran and other
issues. Total International Relations Vice President Romaric
Roignan, State Energy and Natural Resources Division Chief Peter
Haymond, and Econoff accompanied.


3. (SBU) Darricaarrere began by noting that Total pays great
attention to U.S. policy when making investment decisions.
Total was one of the earliest major international oil companies
to recognize that the energy industry would have to adjust to an
approaching peak in oil production. The energy industry would
not be able to deliver much more than 100 million barrels of oil
a day, and the industry must be prepared for declining
production. Total views the universe of countries open to
international oil company involvement as limited and declining
in view of growing resource nationalism. Total also takes the
climate change issue very seriously, he added. Total is focused
on growth, but the twin challenges of controlling carbon
emissions and finding new conventional oil reserves are
significant.


4. (C) Simons stressed continuing U.S. concerns over Iran's
political behavior and the negative consequences of major new
foreign investments in Iran's energy sector. There have been
few new deals signed with Iran in the past few years, he said,

due to widespread objections to Iran's nuclear program and
Iran's own reputation as a difficult and unreliable partner.
More recently, however, Iran has been more aggressively seeking
new energy investment deals, and making public announcements of
progress in negotiations in an effort to demonstrate a "business
as usual" environment. If such deals actually go forward, they
would have an extremely negative impact on U.S. foreign policy
objectives and on the reputations of the foreign firms involved
in the United States. Simons outlined the range of Congressional
concerns on Iran, including recent hearings and pending
legislation. He pressed hard for Total to issue a more nuanced
public statement on its interest in moving ahead on Iran-related
investment which, like the recent Shell statement, gave due
credit for geopolitical factors. Finally, Simons noted that
the new UN Security Council resolution addressing Iran's nuclear
program would likely include language recommending that UN
members exert restraint on extending export credits to Iran, and
the French Government had already announced plans to cut its
export credit lines for the coming year. In that atmosphere,
any forward movement on energy sector investment plans would be
extremely poorly timed.


5. (C) Darricarrere responded that Total had made no final
investment decision regarding investment in Iran's South Pars
Liquid Natural Gas (LNG) project. He noted that certain
financial elements of the project were "not progressing very
quickly" and did not believe Total would make a final investment
decision "within the next few weeks." Total said that it wanted
more time before making a final investment decision and that,
somewhat surprisingly, the Iranians were not pushing Total into
deciding quickly. He stated that the rates of return being
offered were still not sufficient to satisfy the Total board.
Darricarrere noted that Total understood the "entire political
issue" and would take foreign policy factors into consideration,
but argued that sanctions, if not well adapted, would impact the
international oil price. Nonetheless, Total would abide by any

PARIS 00001065 002 OF 002


UN Security Council resolutions, as well as any GOF or EU
regulations regarding trade with Iran. Darricarrere hinted that
Total will also wait to see the policies of the new French
government before making a decision. Simons pressed again for a
more nuanced public statement from Total, including a deferral
of the final investment decision beyond "weeks" into calendar
year 2008.


6. (C) Turning to the broader question of Iranian reliability as
a long term gas supplier, Simons asked Delacarriere for his
views on whether the Iranians had firmly made up their minds to
enter the global LNG industry when there appeared to be an
unresolved domestic debate over whether that gas would continue
to be needed to supply the burgeoning domestic market. The
Iranians did not meet their relatively modest gas export
commitments to Turkey, for example, when temperatures dropped in
the winter and the gas was needed for domestic heating; would
the preference to supply domestic markets impact Iran's
reliability as an LNG supplier? Iranian LNG investments could
combine high levels of economic risk in addition to the
well-known political risks. Judging by the paucity of deals
signed in the past three years, the GOI has not been willing to
compensate investors for these increased risks. Simons
suggested that these factors contributed in part to the decision
of the Japanese oil firm Inpex to pull out of the Azadegan
Project. Darricarrere agreed that Iran had not been prepared to
provide such compensation for investors, and acknowledged that
Total was not/not interested in pursuing the Azadegan project.
However, he disagreed on Iran's attitude toward LNG, asserting
that the oil ministry was determined to put Iran on the map as a
global supplier.


7. (C) Simons noted that other firms potentially interested in
Iran are also pulling back. At their recent annual conference,
Cambridge Energy Research Associates staff supported the USG
assessment that banks and businesses are reducing their exposure
to Iran, complicating the financing of energy sector
investments. Simons questioned whether Chinese firms were
likely to develop an LNG project in Iran by themselves. With
the recent rise in natural gas prices, Daricarrere agreed that
Chinese interest in LNG has decreased. Simons also noted that
the U.S. had approached Shell, Repsol, and their respective
governments after press reports had circulated of a new
Memorandum of Understanding on developing Iran's South Pars gas
field. These firms publicly stated that these investments are
not final and that no final investment decision would be made
until 2008.


8. (C) Darricarrere asserted that Total would factor all these
points into its Iran investment decision.


9. (U) DAS Simons has cleared this cable.

STAPLETON