Out-Law News 2 min. read
14 Jul 2015, 3:23 pm
The agreement will start to open doors to international companies interested in the Iranian market, said oil and gas expert George Booth of Pinsent Masons, the law firm behind Out-Law.com.
Booth said: "Oil and gas developers will be relieved to learn a final agreement with Iran has been reached and preparation for re-entry can be stepped up a gear. The deal, which, if implemented, will end years of debilitating restrictions on trade, will pave the way for a new era for Iranian natural resources and will open the door to international developers queuing up to re-enter this potentially lucrative market."
"Iran is ambitious about the contribution it can make to global hydrocarbon production with some sources estimating an additional one million barrels per day of oil hitting the export market within six months after sanctions are lifted," Booth said. "Even with a more conservative outlook, today’s news could be another game changer at a time when the global oil industry has been in a state of flux."
While the news is cause for celebration for some, "developers are well advised to temper enthusiasm until the full detail of the deal is disclosed and the complex web of sanctions is fully unwound over the coming months and years," Booth said.
"We really need to understand still the timetable for implementation of this agreement. Clients will need to frame their investments terms so that they have the flexibility needed to be fit for what will be a rapidly changing legal and business environment over the next few years. Snap-back provisions which essentially give the P5+1 the power to push the reset button should they regard Iran to be reneging on aspects of the final deal will have to be considered in contracts. Otherwise they could leave developers exposed again to sanctions and becoming liable to costly fines and severe contractual penalties," he said.
The agreement comes after nearly a decade of negotiations.
In a joint statement, the G5 +1 and Iran said that "Thanks to the constructive engagement of all parties, and the dedication and ability of our teams, we have successfully concluded negotiations and resolved a dispute that lasted more than 10 years."
"The Joint Comprehensive Plan of Action includes Iran’s own long-term plan with agreed limitations on Iran’s nuclear program, and will produce the comprehensive lifting of all UN Security Council sanctions as well as multilateral and national sanctions related to Iran’s nuclear programme, including steps on access in areas of trade, technology, finance, and energy," the statement said.
Iran has agreed to cut its enrichment capacity by two-thirds and will stop using an underground facility for enriching uranium, while its stockpile of low enriched uranium will be reduced by 98%, the US White House said.
The core of a heavy water reactor will be removed, and it will be redesigned so that it will not produce weapons-grade plutonium.
Iran will allow UN inspectors to enter sites when the inspectors have grounds to believe undeclared nuclear activity is being carried out there, the Guardian said.
Once the International Atomic Energy Agency (IAEA) confirms that Iran has taken steps to shrink its programme, UN, US and EU sanctions will be lifted, the Guardian said.
In a speech at the White House today, US president Barack Obama said that the deal "meets every single one of the bottom lines...we established when we achieved a framework earlier this spring. Every pathway to a nuclear weapon is cut off."
Sanctions relief was extended by three days last week to give more time to reach an agreement, in the fourth extension since sanction relief plans were set out in the 2013 Joint Plan of Action (JPOA).
The JPOA eased US and EU sanctions on petrochemical, gold and precious metal exports from Iran, plus US sanctions on the auto and aviation industries. It prohibited further nuclear-related sanctions, created a financial channel for humanitarian trade and increased the threshold on monetary transactions involving Iran.