US sanctions on Iran leave European companies with difficult choice
LONDON - Following the US withdrawal from the Iran nuclear deal, pressure is increasing on Tehran because many European companies face the difficult choice of whether to continue to do business in the country and face US sanctions or withdraw.
Many French companies hoping to do business in Iran will find it almost impossible to do so if the United States imposes new sanctions, French Finance Minister Bruno Le Maire acknowledged.
His comments came just a few weeks after French car giant Peugeot-Citroen, which manufactures vehicles under the Peugeot, Citroen, DS, Opel and Vauxhall brands, announced it would exit the Iranian market within two months.
Although France, along with several other European countries, has said it intends to uphold the Joint Comprehensive Plan of Action (JCPOA) despite the US withdrawal, it is becoming increasingly clear that the Iran nuclear deal will likely falter in the face of US sanctions.
“[French companies] won’t be able to stay because they need to be paid for the products they deliver to, or built in Iran, and they cannot be paid because there is no sovereign and autonomous European financial institution,” Le Maire told BFM television.
He said European countries would look to build an “independent” and “sovereign” financial institution that would allow finance channels between European countries and “any other countries on the planet.”
“It’s up to us Europeans to choose freely and with sovereign power who we want to do business with… The United States should not be the planet’s economic policeman,” he added.
Given the complexities of even establishing a cross-European financial institution such as this, however, few believe that this can be achieved in time to save the JCPOA. Even if such a financial institution were to be created, it -- along with any multinational companies using it -- would similarly be facing the same threat of US sanctions.
This means, in effect, that any multinational company with direct ties to the United States or reliant on the US financial system and dollar transactions, could find itself in the crosshairs of US sanctions. Despite tough talk from the European Union on getting around US sanctions, many European companies will likely not want to take the risk.
“Many international businesses and financial institutions are scarred by the unexpected economic crises and tough regulations of the past decade and have adopted more thorough ‘de-risking’ policies in response," Patrick Clawson, director of research at the Washington Institute for Near East Policy, said in a posting on the group’s website.
"How individual firms assess doing business in high-risk jurisdictions is more important than whether foreign governments are willing to cooperate with US sanctions, since the firms are the ones actually carrying out economic activity.”
While Peugeot-Citroen said it intended to leave the Iranian market for fear of US sanctions, French carmaker Renault, which notably does not sell cars in the United States, said it would maintain a downsized presence in Iran, despite the sanctions.
Even this commitment came with a caveat, with the French firm confirming that it would have to do whatever served its own economic interests best. “However, we are not going to do so [stay in Iran] to the detriment of Renault’s interests. We will be watching closely to make sure our presence in Iran does not provoke direct or indirect reprisal measures on the part of American authorities,” Renault CEO Carlos Ghosn told shareholders.
The issue of US sanctions is one that goes beyond Europe, with Japanese and South Korean companies also feeling the heat.
One week after Peugeot-Citroen left the Iranian market, Japan’s Mazda and South Korea’s Hyundai suspended contracts with Iran.
“Mazda and Hyundai’s interests in the US market are much more than in Iran, and they will not sacrifice their profit for the sake of Iran,” Valiyollah Maleki, a member of Iran’s parliamentary Industries and Mines Commission, told the parliament-affiliated website.
Multinational corporations, including Total, Maersk, General Electric, Honeywell, Boeing, Luk Oil, Reliance and Siemens have announced they will leave Iran so as not to be sanctioned by the United States.
Senior US diplomats visited South Korea and Japan in June to “convey the [US] administration’s policy, including with regard to the re-imposition of nuclear-related sanctions on Iran,” a US State Department statement said.
"The United States is working with nations around the world to create a new global effort to counter Iran's nuclear and proliferation threats, as well as its support for terrorism, militancy, and continued development and testing of ballistic missiles," the statement added.