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. Last Updated: 07/27/2016

Iran Plans Fund to Skirt Sanctions

TEHRAN, Iran -- Iran is planning an investment fund outside the Islamic Republic to raise financing for its huge South Pars gas field and circumvent a financial squeeze by Washington, a top Iranian energy official said Sunday.

As the United States pushes for tighter United Nations sanctions on Iran over its atomic work, Akbar Torkan, head of Pars Oil and Gas, said Tehran would base the fund in Bahrain or Dubai, both regional financial centers.

"It's a reaction against the financial sanctions on Iran," said Torkan, a former defense minister. "There are no sanctions against an investment fund."

The proposal for the fund -- open to all -- needs government approval, but Torkan said he was confident that the South Pars Investment Fund would get official backing in about one month.

The cash would be assigned to development phases of the field and would ensure the government would not have to dip into its own coffers as it recently did for some other phases.

The United States is leading efforts to isolate Iran over its atomic program, which Washington says involves a covert plan to make bombs, a charge Iran denies.

Washington has slapped sanctions on two Iranian banks. UN sanctions targeted one. Iranian officials have brushed off the impact, but Torkan said the measures had deterred several foreign banks.

"No European bank is ready to prepare new financing for us. The United States is putting pressure on all European banks," he said, adding that U.S. pressure extended to oil companies such as Statoil and Total.

Two of Iran's European investors -- Royal Dutch Shell and Total -- have indicated publicly political concerns could influence any new investment plans.

The fund idea was prompted by Societe General's withdrawal from Phases 17 and 18 of the South Pars gas field.

"SocGen has stopped their financial support because of pressure from the United States," said Torkan, adding that the government had allocated $720 million from reserves for the project, still a small fraction of the $5 billion cost of the project.

Investors would be guaranteed a minimum rate of return of 8 percent by the National Iranian Oil Company, he said. The maximum would be 15.9 percent.

Despite sanctions, Iran says foreigners are still keen to invest in its gas reserves, the world's second biggest.

Torkan is now negotiating with local Petropars and Italy's Eni for a buyback contract for South Pars phases 19 to 21.

Buybacks are standard development contracts in Iran, where investment in developing a field is rewarded with a share of production for a short period before the state repurchases the field. Foreign firms often complain about the terms, however.

Torkan said a $25 billion deal with China National Offshore Oil, parent of Hong Kong and New York-listed CNOOC, would be signed by the end of August.

"China is working very seriously for this project. We just need a few months to finalize everything," Torkan said.