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What Threats of New Energy Sanctions in Iran Mean for Investors


Congress's push will likely make room for other players eager to replace those who are fleeing.

Editor's Note: This article was written by Fawzia Sheikh for, which offers free information and analysis on energy and commodities. The site has sections devoted to fossil fuels, alternative energy, metals, oil prices, and geopolitics.

US lawmakers are toughening their stance on Iran's energy industry with new economic penalties, but experts doubt the Islamic regime will pay much attention and is more likely to open the doors even wider to other players eager to replace fleeing investors.

Long on Congress's radar screen, Iran is being targeted by two bills: the Senate's Dodd-Shelby Comprehensive Iran Sanctions, Accountability and Divestment Act passed in late January and the House's Iran Refined Petroleum Sanctions Act approved in December.

The bottom line is these bills, once signed into law by President Barack Obama, will pursue financial institutions and businesses that do business in Iran's energy sector or help the regime build its refining capacity.

To an outsider, the stakes appear high.

After all, Iran, an OPEC founding member, holds the world's third-largest proven oil reserves and the world's second-largest natural gas reserves, according to the US Energy Information Administration.

Not to mention, its pariah status in the world makes luring investment difficult at times.

Despite that, the country isn't all that concerned about the latest congressional maneuvering, observers charge.

"I think these measures are a good thing to do but let's be honest [that] the impact is going to be not necessarily immediate, and that the first instinct of Iranian leaders will be to ignore it," said Patrick Clawson, deputy director for research at the Washington Institute for Near East Policy and an Iran expert.

Iranian leaders are confident East Asian firms can fill a void left by major Western companies, Clawson told Iran is a major producer, but its oil fields are quite old and it has to do an "extraordinary amount" of drilling, he said. This makes the country a "very attractive place for international oil field services companies which are not represented there," Clawson maintained.

Countries like Russia, China, Malaysia, and India may potentially step up to the plate, Alex Vatanka, a scholar at the Washington-based Middle East Institute, said. "The Russians and the Chinese are sitting there thinking: 'Great, Iran can't deal with the West; the market is ours to be had.' "

Venezuela, a long-time US foe, is close allies with Iran too, a Washington source familiar with Iranian issues said on the condition of anonymity. Venezuela has enormous petroleum and refining capacity and isn't about to "go along with any embargo," said the source.

The Islamic regime, moreover, believes it can get by without access to Western technology, Clawson noted.
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