“Trust but verify” is a well-known phrase from the Reagan era, often used by the White House back then when discussing negotiations with the Soviet Union.
President Reagan knew he was using a much older Russian proverb – Доверяй, но проверяй (“Doveryai, no proveryai“). Such are the often strange twists in international diplomacy.
The past three days have once again reminded me that we may well be back in similar territory.
Being the Only American in the Room Can Be Very Tiring
As I write this from the Iranian Gas & LNG Summit in Frankfurt, our meetings in Germany’s financial center are finally winding down. Throughout, there have been two parallel sessions going on.
One level has been the official program of the first international summit devoted to Iranian natural gas and LNG (liquefied natural gas, the key to exporting gas beyond the reach of pipelines).
On another level, a series of meetings have been held on the margins of the summit. The discussion here has been much more frank and forthcoming. In some cases, these have resulted in quite pointed and direct conversations.
That I was the only American here occasionally put me at the center of matters. And that’s not the only reason why the summit was grueling.
It now looks like the U.S. energy industry is going to be left behind as the rest of the world rushes in to a major new market…
Tensions Between Iran and America are Rising
I had formal presentations before the entire summit on Tuesday and again yesterday. But the side bar conversations have taken up most of the remaining available time. Which means that now that the summit is drawing to a close, the exhaustion is setting in.
With the world’s largest conventional gas reserves, Iran has always been regarded as a likely main player in the developing global gas market. However, as with crude oil, the imposition of Western sanctions has impeded any progress for years.
That was supposed to change after the 2015 nuclear accord between Iran and the P5+1 (the five permanent members of the UN Security Council – the U.S., China, Russia, France, and the UK – along with Germany).
Officially referred to as the Joint Comprehensive Plan of Action (JCPoA), the accord specifies Iranian compliance with an international demand that it pull back from developing nuclear weapons. In return, the international sanctions were to be phased out.
Tehran had always denied it had an interest in developing nuclear arms. Yet the U.S. repeatedly pointed to actions inside Iran that could not be explained in any other way. An impasse ensued that both made life inside Iran worse and created protracted geopolitical friction.
These days there is still rhetoric coming from Washington alleging nefarious Iranian intent, compounded by an Executive Order (EO) prohibiting visas for Iranian citizens (and those of six other Muslim countries) trying to enter the U.S., and retaliatory moves against visas for U.S. citizens by both Iran and Iraq (another country on the “list of seven”).
As I have noted previously here in Oil & Energy Investor, that development has called into question my intended appearance in May at the Iranian Oil Summit in Tehran.
A U.S. court may have prompted a suspension in the enforcement of the EO, but the visa issue from Iran remains in limbo.
One conclusion, however, is very apparent from the last three days of meetings…
U.S. Companies are Being Left Behind by the Sanctions
While the U.S. continues to keep sanctions in force, Europeans have already relaxed provisions. Companies are entering negotiations for Iranian projects and Tehran is responding with some unusual transparency and contract revisions.
Of course, after prolonged periods of negotiation and project analysis, some of these deals will remain too risky and potential European partners may still delay or walk away altogether. In the case of natural gas and LNG, these projects are years away from any beginning of operations anyway.
The difference is that business interests in the U.S. are likely once again to fall well behind foreign competition in what is a major opening market.
The main projects will find outside partners and move forward with or without American-based involvement. That means the primary damage to U.S. interests will be self-inflicted. You’ll hear more from me about the players and issues raised in the private meetings here, in due course.
But two anecdotes will give you the flavor of this self-inflicted damage… and the problems Americans, with increasing frustration, are going to experience…
“Trust but Verify” Needs to Work in Both Directions
Yesterday, during an intense exchange, an oil trader from a Middle Eastern country received an email alert and immediately cut off our conversation.
I asked him why he was leaving.
He apologized and replied: “Sorry, but my home office has advised that I am not in compliance if I talk about anything Iranian with an American.”
On another occasion, an Iranian expert insisted on speaking Farsi (Persian), even though I knew he was conversant in English.
His reasoning for that was pointed, even through the filter of a translator: “During the sanctions, I was not allowed to import many English words,” he said with a wry smile. “As a result, these days I do not have enough to string into full sentences.”
Stay tuned for next week, when I’ll have more for you on what I learned in Frankfurt…
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