Italian Firms More Prepared for Operations in Iran, Says Rouhani

Sometimes, not taking a strong position can pay off. This is probably the case with Italy, which has been credited by President Hassan Rouhani as (one of) the most suitable partner(s) to develop Iranian oil and gas reserves.  

The point made by Rouhani on Monday is that Italian companies have the needed expertise and experience to cooperate with domestic firms.

“In the new conditions, considering that some Italian firms have had cooperation with Iran in oil, gas and heavy industries, the ground is more prepared for their operation in Iran's economy,” he said in a meeting with Italian Prime Minister Matteo Renzi in New York, as reported by Shana, the Official News Service for Oil and Gas in Iran. 

Rouhani is set to visit Italy in the coming months, in a move that he referred to as a potential game changer, not just for the Mediterranean country but for the entire European Union. 

“In the post-sanctions era, a new chapter should be opened in cooperation and relations between Iran and the European Union, including Italy,” Rouhani said. 

It emerges clear that, despite substantial divergences, Iran is trying to move closer to Europe, and Turkey. Against this backdrop, Italy is in the right condition to benefit from a thaw in Western ties with Iran. That is for several reasons other than technology.

POLITICS PLAYED A SIGNIFICANT ROLE

According to a report by The Guardian, Federica Mogherini, who was the first to announce the Lausanne accord, was the only European politicians who scored goals during the negotiations.

In an article published on April 3, Julian Borger wrote that ‘the Italian former foreign minister’s timing was impeccable. She took up the role as convener of the six-nation group as the talks were beginning to gather momentum.’

As a result of the deal, investment bank Mediobanca and export credit agency SACE signed a memorandum of understanding with Iran's economy ministry and its central bank. 

But that’s just one part of the story. Italy, which was not directly part of the nuclear talks that led to the agreement, began pushing for better relations with Iran already in 2013. 

Since the election of Rouhani, Italy did indeed make the case for overtures to Tehran. In December 2013, for example, then Foreign Minister Emma Bonino was the first EU Foreign Minister to pay an official visit to Iran in almost 10 years. 

Similarly, France could capitalise on a soft position on Iran, and it comes as no surprise that the two countries continue negotiations, and get closer to contracts.  

“Immediately after removal of sanctions, negotiations between the companies will be signed into contracts,” Director General for Europe, US, and Caspian Sea Neighbors, Hossein Esmaeili, explained Shana on Monday, referring to French companies. 

ENI’S DISCOVERY

Alongside Rouhani’s declarations, Italian companies have other reasons to rejoice, as the discovery off Egypt seems perfectly timed to give an edge to ENI. 

Whereas France’s Total is running into financial and legal problems, ENI is enjoying a period of great visibility. For instance, a recent article by Stephen Jewkes for Reuters reported that ‘ENI’s winning gas streak leaves competition chafing.’

Moreover, ENI enjoyed good ties in Iran for a long span. It was not until mid-2010 that ENI agreed to end its Iranian activities in exchange for avoiding further US sanctions scrutiny. In this sense, American companies are basically excluded from this oil an gas race to Iran, and this fact further increase ENI's odds of winning significant contracts.

SUMMING UP: NOT ONLY ENI

Italy’s overture to Iran, and its technological know-how are two perfect economic and political factors making ENI's adventure in Iran easier. The six-legged dog has good chances to be the first in line in accessing Iran’s energy markets.

Especially in the event that ENI manages to sell shares in its Zohr discovery off Egypt, the Milan-based company might get back its shares in Iran, capitalising on the kind of liquidity that just a few companies have in a moment of low oil prices. 

Italian Prime Minister Matteo Renzi seems to know well that, after long years of 'wait-and-see', it might the right moment to take an active position. 

“I will underline it to the Italian firms that in cooperation with their Iranian counterparts, they are required to do their best to formulate valuable joint activities for stronger presence in the global markets,” Renzi said in New York on Monday. 

His words could be good news also for Italian companies active in the mining sector, as the Iranian leadership is trying to diversify sources of revenue and it is looking at this high-potential alternative. 

“The oil market, which falls from $100 to $40 following a sign from world powers and then actions by wicked elements in the region, is by no means reliable and we have to find an appropriate alternative. The mining sector is the best alternative,” Supreme Leader Ayatollah Ali Khamenei said earlier this month. 

Sergio Matalucci is an Associate Partner at Natural Gas Europe. He holds a BSc and MSc in Economics and Econometrics from Bocconi University, and a MA in Journalism from Aarhus University and City University London. He worked as a journalist in Italy, Denmark, the United Kingdom, and Belgium. Follow him on Twitter: @SergioMatalucci