Shell says it faces sanctions in Iran

Business Week:

Royal Dutch Shell PLC disclosed in a filing this week that it faces risks of U.S. sanctions in Iran.

In a filing with the U.S. Securities and Exchange Commission related to the merging of its British and Dutch halves Wednesday, the oil company said its investments in Iran and Syria could mean it will be barred from financing by U.S. institutions. READ MORE

The company declined to comment for this article.

The SEC has written to European and U.S. oil companies active in embargoed countries, asking them to inform investors about the risks they face from investing in countries the United States accuses of supporting terrorism.

A version sent to European companies also requested details about commissions paid in Iran, a lawyer has previously said.

The sanctions are widely known, but the fact Shell disclosed their possible impact means the risk should be taken seriously, said Manouchehr Takin, a London-based analyst with the Centre for Global Energy Studies.

Shell says the U.S. legislation is in conflict with European law, which specifies no limit should be put on investment in Iran. Shell says the enforceability of U.S. sanctions on Shell's Iran projects appears to be unlikely.

In fact, the U.S. government has formally waived the sanctions for an Iranian natural gas project managed by Total SA of France, OAO Gazprom of Russia and Petronas of Malaysia. It has since turned a blind eye to other investments by Shell and Eni SpA of Italy.

However, the disclosure comes amid a background of political pressure that could lead Shell "to be more careful" with its Iranian investments, Takin said.

"The publication could be used by other departments, such as the U.S. Treasury," to act against the company, he said.

Scrutiny from the SEC on European companies' activities in Iran could increase if Rep. Christopher Cox, R-Calif., nominated by President Bush to head the regulator, is appointed. Cox, whose appointment could come after a Senate hearing next week, has supported stronger enforcement of U.S. sanctions against Iran.

A senior Iranian oil official involved in negotiating deals with foreign energy companies said, "This is nothing new in that Shell has supposedly been limited by U.S.-imposed sanctions in Iran in the past, but that hasn't affected business, and my feeling is that it won't do so in the future."

Shell has a 70 percent interest in an agreement to redevelop the Soroosh and Nowrooz oil fields in the northern Gulf with Iran's national oil company.

It has also signed a framework agreement for a 25 percent stake in the Persian liquefied natural gas project.

Shell also maintains activities in other countries that are subject to sanctions. It has majority stakes in three production-sharing contracts in Syria, and it operates a downstream business in Sudan.