The Rhum gas field in the North Sea, which supplies 5% of the UK’s gas, is half-owned by the Iranian State Oil Company.
BP, which owns the other half, is in the process of offloading its share to small North Sea specialist Serica, but that deal has not completed.
BP does huge amounts of business in the US and will be desperately keen to avoid being seen as a business partner of the Iranian state.
It’s a good example of how sanctions against a state can have wide repercussions for the international business community.
The chairman of Serica, Tony Craven-Walker, told the BBC he was still hopeful that the deal would close and that there would be no interruption to a major source of gas for UK families and businesses.
However, one of the conditions of the deal closing is obtaining a licence to operate from the US Treasury Department, which is thrown into question with the imminent reintroduction of US sanctions against Iran.
BP and Serica both said they had no plans to stop production in the short term.
However, Serica conceded that it may have to change personnel and companies involved in the operation of the field to ensure there were no US individuals or entities involved.
UK gas supplies were shown to be very tight during the recent cold snap, when National Grid issued a gas deficit warning that resulted in some companies agreeing to cut their consumption to protect household supplies.
Earlier this year, Iran’s oil minister, Bijan Namdar Zanganeh, said multinationals including Royal Dutch Shell, France’s Total, Italy’s ENI, Japan’s Inpex and Malaysia’s Petronas had submitted proposals to expand the Azadegan oil field near the Iraqi border.
For those companies with significant business in the US – such as Shell and Total – those proposals may need to be shelved. Total is particularly exposed, as it has made significant investments in Iran.
Meanwhile, the Department for International Trade said the government “continues to fully support expanding our trade relationship with Iran”.
However, it added this line that firms may not find totally reassuring: “How UK companies act in response to US sanctions is a commercial and legal decision for that company. Where necessary, legal advice should be sought.”
When the US decides it doesn’t want to do business with a country, non-US companies can also get burned.
In 2012, HSBC was forced to pay a $1.9bn US fine for breaching certain sanctions, including the one imposed on Iran. Standard Chartered paid a $400m fine for Iranian sanction-busting activity.
Both HSBC and Standard Chartered did not re-enter the Iranian market after the original sanctions were lifted – a factor that many think held Iran’s economy back over the last few years.
In a globalised world, sanctions can have long tentacles. There is plenty to keep company lawyers busy as the details of this new sanctions regime become clear.
Source: BBC News