Shifting sanctions force Russia’s TMK into different markets; company plans U.S. layoffs
TMK Group, a major supplier of oil and gas pipeline around the world, is looking eagerly toward increased business in Iran as sanctions against the country are removed following the implementation of the Iran Nuclear Deal. The company believes about 20% of global oil brought to the surface at one point or another flows through a TMK tube, reports The Wall Street Journal.
Following the shale boom in the United States, TMK began to expand its presence in North America, starting 12 production plants and employing 2,700 people. Lower oil prices, a drop in drilling and deteriorating relations between Russia and the U.S. have made the U.S. a less attractive market for the pipeline company, however, and TMK plans to lay off 40% of its North American workforce.
During the Soviet era, TMK’s plant in Volgograd 1,000 kilometers (about 621 miles) south-east of Moscow supplied up to 40% of the pipe used in Iran’s oil industry – including well casings and pipelines used to transport natural gas. The implementation of international sanctions against Iran dealt a blow to TMK’s bottom line, and now the company is looking to reenter the market.
“The idea is simple: They lift the sanctions, we send the pipes,” said Sergei Chetverikov, director of the Volgograd pipe factory. “If you have dry firewood and the wind is blowing, the fire will get going. All you need is a match,” he said, suggesting the company is simply waiting for the first spark to reignite its business in the Islamic Republic.
TMK not alone in eyeing new business in Iran
With the lifting of international sanctions against Iran, the country now has access to approximately $29 billion in newly unfrozen money to spend on infrastructure. The International Monetary Fund projects that the infusion of cash, along to Iran’s return to international markets, should allow the country’s economy to grow 5.5% in 2016 and 2017.
State-owned gas giant Gazprom (ticker: OGZPY, Gazprom.com) and oil major Lukoil are eyeing investments in LNG projects in the Persian Gulf, as well as new oilfield projects. Oilfield service provider Eurasia Drilling Company and Tatneft, a smaller Russian oil company based in predominantly Muslim Tatarstan, are also looking at new projects in Iran.
Despite hopes that Iran will offer plenty of untapped potential, not everyone is ready to jump in head first. “The general feeling is still cautious,” said Ildar Davletshin, an oil and gas analyst at Renaissance Capital, a Moscow investment bank. With low oil prices, the budgets of Russian oil companies are “under huge stress.”
Last July, German Vice Chancellor Sigmar Gabriel escorted a business delegation to Iran which included Daimler (ticker: DAI, Daimler.com), Volkswagen (ticker: VOW3, VW.com) and Siemens (ticker: SIE, Siemens.com).
U.S. companies still unable to access Iranian markets
While the removal of international sanctions make it possible for many European companies to pursue projects inside Iran, U.S. companies are still largely unable to do business with Iran. U.S. sanctions over Iran’s support of terrorism and human rights abuse remain in place, meaning only a few select products, like civilian aircraft, Persian rugs and pistachios, will be traded between Iran and the United States.
