Fair thumbs its nose at sanctions

Financial Times: Fair thumbs its nose at sanctions

By Anna Fifield in Tehran
Published: April 17 2008 02:44 | Last updated: April 17 2008 02:44

It could have been an oil fair anywhere in the world. In the huge pavilions there were flashy displays for Shell, Lukoil, Siemens and Statoil. And all were jumping at the chance to show off their products and services to potential customers.

But this was not just anywhere. It was in Tehran, at a five-day oil trade fair that has attracted 450 international companies, the largest contingents coming from Germany, the UK, Russia and China.

It takes place at a time when the international community – led by the US – is trying to use trade and financial sanctions to press Iran over its nuclear programme. The US has gone one step further, intimating that companies that do business in Iran might run into trouble with their US operations.

But exhibitors big and small on Wednesday suggested they simply could not afford not to be in the Islamic republic.

“Iran is one of the most important oil and gas countries in the world. The world is desperate for energy. We have to be here,” said Andre Goffart, Middle East vice-president for Total, the French energy giant. “Energy will be a big challenge for the world sooner or later, so energy companies cannot be accused of not investing enough and of investing too much at the same time.”

At the other end of the spectrum, John Choy of Shilla Fire, a Korean company that makes fire extinguishers for refineries, sat in an all but empty booth. His exhibits had been sitting in the Iranian customs depot for two months.

Still, Mr Choy was not discouraged. “There are many problems but Iran is one of the biggest oil-producing countries in the world. I hope I can expand my sales volumes here.”

Iran certainly needs outside technology. After decades of US sanctions and under-investment in its energy industry, the country’s oil refineries are antiquated and its huge gas reserves are still largely untapped.

But for Tehran, this year’s fair, organised by the oil ministry, was about more than business. The newspaper published specially for the exhibition on Wednesday featured a cartoon on its front cover: it showed a 10,000kg weight bearing the sign “Iran oil fair” on top of a flattened Uncle Sam.

The US-led drive for sanctions has certainly had an impact, with smaller exhibitors in particular complaining that it had become more difficult to finance trade and to import certain technologies since the curbs were imposed.

Shimi Tajzieh Sina, a private Iranian company that was forced to stop selling petrochemical laboratory equipment for the US company Labomed, attended the fair anyway. “Right now we can’t sell their products, but we are promoting them because one day these restrictions will end and we will be able to sell again,” said a representative, declining to give his name.

For others, the sanctions and the growing western fear of doing business in Iran has created opportunities.

“Iran’s oil reserves are so big, so in the future the market will only get bigger,” said Zhao Hui of Zhongcheng Machinery, part of China National Petroleum Corp.

“The sanctions are having some influence, but at the same time there is so much opportunity here and Americans cannot sell their products,” she said.

The restrictions are even drawing some oil companies closer together. “In Belarus we are in a similar position as Iran, the US has imposed some restrictions on us too,” said Aliaksei Pinchuk of Belorusneft, which has a $1bn-plus contract to develop an oil field in southern Iran. “Belorusneft is not a name people here are scared of.”

But for companies from states with less friendly relations, such as the UK, their decision to exhibit was controversial at home.

“In the last three years the government has gone from enthusiastically supporting the export of British technology to treating us like a pariah company,” said Keith Hall, managing director of Humble Europe, a Manchester-based geochemical company that is helping Iran explore for oil.

“But I was involved in opening up the Chinese market in the 1970s and at that time I encountered a lot of problems with the British government,” Mr Hall said. “Just look at the situation there now.”

Recent deals

March 2008
Switzerland’s EGL in deal to buy 5.5bn cubic metres of gas a year for 25 years from the National Iranian Gas Export Company

December 2007
Iran’s Pars Oil and Gas Company signs a $16bn (£8bn, €10bn) gas field development contract with Malaysia’s SKS Ventures

December 2007
$2bn oil contract with Sinopec of China, to partly develop the giant Yadavaran oil field in south-west Iran

Copyright The Financial Times Limited 2008

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