By OGJ editors
WASHINGTON, DC, Jan. 28 -- Austria's OMV AG signed a memorandum of understanding with Iran's National Iranian Gas Export Co. that OMV said strengthens the two countries' interest in developing future exploration and development projects together.
OMV officials told OGJ that the nonbinding declaration, signed Jan. 27, complies with all European Union and Austrian laws. They declined to speculate on whether the action would trigger a reaction from the US government.
US Department of State officials could not be reached for comment.
But other US government sources familiar with the OMV plan said it was unlikely any action would be taken because the agreement is not a binding contract. Even if OMV had announced a binding arrangement, the White House would avoid trying to block the deal, US officials suggested.
Sanctions
A US law called the Iran Libya Sanctions Act (ILSA) encourages the White House to use economic sanctions as a way to discourage non-US-based oil companies from investing more than $20 million in either country.
Neither US President George W. Bush or former President Bill Clinton used the bill to its full potential to impose sanctions; however, the threat of such action did deter some large investments from being made when the law passed in 1996, according to some analysts.
Yet over the years, the bill's effectiveness has waned given there has been a general understanding between the US and the EU since the late 1990s that the law would not be strictly enforced.
Now, any real challenge from OMV's announcement will come from the US Congress, not the White House.
Some House Republicans say ILSA, due to expire in 2006, should be strengthened to give the White House less discretion. But other lawmakers say the law is outdated and should be rescinded, given recent international events. They point to Libya's recent efforts to cooperate on anti-terrorism measures and more quiet efforts by Iran's reformist president to encourage dialogue with the West.
A White House report on ILSA's effectiveness is due to Congress in March. Meanwhile, industry lobbyists anticipate hearings this year on sanctions policy, especially with regard to Libya.
OMV actions
OMV's announcement came after Austrian President Thomas Klestil made a state visit to Iran. He was accompanied by Helmut Langanger, a member of the executive board of OMV responsible for exploration and production, and Otto Musilek, CEO of OMV Erdgas GMBH.
They signed the exploration and production agreement and also pledged to strongly consider investments in the $4 billion Nabucco pipeline from Turkey to Austria. OMV will make a final decision on the pipeline later this year.
In April 2001, OMV signed a 4-year agreement with Iran regarding exploration in the Zagros region. OMV's interest lies on the Mehr block where it is the operator for a consortium. Partners are Repsol-YPF SA (Spain) and Sipetrol (Chile), each with a 33% stake. OMV holds the remaining 34% stake. Drilling is slated to begin in March.
