Azerbaijan's Gas Project Exempted from US Sanctions Against Iran

The Shah Deniz gas field project in Azerbaijan, with its second phase intended for gas exports to Turkey and Europe, has been exempted from US sanctions against Iran. Iran holds a 10% stake in this gas field. The first phase has been operational for over 10 years, producing 30 million cubic meters of gas and 54,000 barrels of condensate daily. The second phase was launched at the end of last month and is currently supplying gas to Turkey. By 2020, its production is expected to gradually reach 44 million cubic meters daily (16 billion cubic meters annually). Of this amount, 6 billion cubic meters will be delivered to Turkey, with the remainder going to Europe. The US had previously exempted this project from sanctions in 2012 as well. Clause 603 of the sanctions text during Barack Obama's presidency exempted the Shah Deniz project and the Southern Gas Corridor pipeline, which is intended for the transportation of gas from the Shah Deniz field. The new US sanctions text refers only to Clause 603 of previous sanctions without mentioning the project by name, stating that it is exempt from sanctions. Iran also holds a 10% stake in the mentioned pipeline section in Azerbaijan and Georgia. The specialized publication Platts has also reported on the exemption of the Shah Deniz project and the Southern Gas Corridor, noting that Iran has a 50% stake in the UK’s Ram field, but there is no mention of this project in the new sanctions text. A White House spokesperson also declined to comment on this project to Platts. BP is responsible for both the Shah Deniz field in Azerbaijan and is a partner with Iran in the Ram field. The company was supposed to sell its stake in the Ram field to the UK’s Serica Energy, but the wait for a US exemption has delayed this deal for months. Ilham Shaban, director of the Caspian Oil Studies Center in Azerbaijan, told Radio Farda that the framework for the exemption of the Shah Deniz and Southern Corridor projects is likely to resemble the sanctions period from 2012 to 2015, in which Iran’s profits from these projects were transferred in US dollars to a bank in Europe and blocked. At that time, the Norwegian company Statoil was responsible for the financial affairs of gas and condensate sales and distributing profits among shareholders, and Iran's money was blocked in Norway. However, now the State Oil Company of Azerbaijan, SOCAR, is responsible for the financial affairs of the project. Mr. Shaban stated that the Southern Corridor has always been encouraged and supported by the US, as it somewhat reduces Europe’s dependence on Russian gas, and the exemption for this project was expected. The second phase of Shah Deniz was launched last month and is expected to deliver 2 billion cubic meters of gas to Turkey by July next year. After two years, this project will reach its final production capacity, which will include not only the daily production of 44 million cubic meters but also 80,000 barrels of condensate daily. To develop the second phase of Shah Deniz and the 3,500-kilometer Southern Corridor, $40 billion is needed. So far, over $31 billion has been invested in these projects.