Political shift in U.S Senate plays havoc with BP’s Iran plans

Published June 10th, 2001 - 02:00 GMT

The monumental change brought about the shift of power in the U.S. Senate has come as bad news to a number of the major oil companies heavily invested in the United States.  


U.S. sanctions are up for renewal in August and it was believed that, with the backing of the Bush White House and particularly Vice President Dick Cheney, they may have been dropped. But now the Democratically-controlled Senate is expected to extend them for up to five years. 


One company that will be particularly miffed is the UK-based oil giant British Petroleum (BP), which was preparing to return to its roots with plans for multi-billion pound investment projects in Iran, on the assumption that U.S. sanctions would be lifted in August.  


BP's chairman, Sir John Browne, had been lobbying the new Bush administration, and had been somewhat confident the former oil men in Washington—among them the president and vice president—would be able to deliver the goods. But the defection of Virginia Senator James Jeffords, who switched his identity from Republican to Independent but said he’d align himself with the Democrats, changed the entire picture. Previously, the Senate had been equally balanced between the Republicans and the Democrats, with Vice President Cheney casting the deciding vote. But now, the balance is 51 to the Democrats and 49 to the Republicans, putting many key Bush programs at the mercy of the rival party. 


The United States’ hard-line attitude toward Iran has weighed heavily on BP, who in recent years has invested massive amounts in the United States. While it stood on the sidelines, it saw European colleagues establish footholds in the Gulf nation’s oil sector. More than $4 billion worth of investments have accumulatively be made by the French TotalFinaElf and the Dutch Shell corporations, both of which also operate in the United States. 


The irony is that BP was the first oil company ever to operate in Iran. In 1901, a wealthy Englishman, William Knox D'Arcy, obtained a concession from the Shah of Persia to explore for and exploit the oil resources of the country, excluding the five northern provinces that bordered Russia. Seven years later, in May 1908, oil was struck in at Masjid-i-Suleiman in the southwest. It was the first commercial oil discovery in the Middle East.  


The Anglo-Persian Oil Company, as BP was first known, was created in n 1909 to develop the Masjid-i-Suleiman oilfield and work the concession.  


BP and its affiliates have been looking for a way back into Iran for some time already.  

In 1999, BP Amoco formally announced that it as has started to look at possible entry into new Iranian petrochemical ventures, although earlier this year it pulled out of a planned oil exploration study deal in Iran's section of the Caspian Sea. 


Later that year, speaking at an oil conference, Arco’s executive vice president, Don R. Voelte, declared that the most effective way to influence the political future of Iran is to ensure that American companies can do business there. "We believe that whenever possible, constructive engagement, rather than isolation, is the best way to have a positive influence on another nation, whose responsibilities at the nation's fifth largest oil and gas company include Middle East development. Obviously, the exclusion of U.S. companies is bad for Arco, but I also believe it's bad for America. I don't believe it makes any sense to preclude U.S. influence in one of the most important countries in one of the most strategically significant areas of the world,” he said.  


In January 2000, Arco was reported to have made a formal bid for Darkhovin and Ahvaz Bangestan oil field contracts. As it became the first U.S. company to bid for an Iranian project following former President Clinton’s signing of an executive order in 1995 banning all commercial trade between Iran. But Arco’s plans were put on hold after it was taken over by BP several months later.  


Would BP be prepared to follow its European rivals and return to the country where it was founded. In conversation with the press, company representatives have been cagey—not admitting that such a move was on the cards, but also not discounting the possibility entirely. – (MENA Report)  

© 2001 Mena Report (www.menareport.com)

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