EU set for clash with US over law blocking Iran sanctions

EU set for clash with US over law blocking Iran sanctions
Denmark’s A P Moller-Maersk Tankers is one of the big European companies already winding down its Iran business with sanctions on the horizon.
By bne IntelliNews May 17, 2018

The EU is to revive a ‘blocking statute’ used in the 1990s to protect businesses working in Cuba to shield European companies that wish to continue doing business with Iran from US sanctions.

The move, announced on May 17 following a summit of the European bloc’s member state leaders in Sofia, means an inevitable clash with the Trump administration, which on May 8 unilaterally walked out of the multilateral Iran nuclear deal and warned foreign companies that chose to remain involved with the Islamic Republic that they would be exposed to Washington’s reintroduction of heavy sanctions against Tehran.

The summit in the Bulgarian capital marked the adoption by the EU of a more aggressive tone towards Donald Trump when it comes to the nuclear accord—which the UK, France and Germany and other signatories Russia, China and Iran are attempting to salvage—and trade battles initiated by the White House. European Council President Donald Tusk told reporters: “The problem is if your closest friend is unpredictable. It is not a joke now. This is the essence of our problem now with our friends on the other side of the Atlantic. I can agree with President Trump when he said unpredictability can be a very useful tool in politics. But only against enemies and opponents. Unpredictability is the last thing we need with friends and family.”

The previous day, Tusk commented that Trump had “rid Europe of all illusions” with his withdrawal of the US from the nuclear deal and trade disputes, remarking: “Looking at the latest decisions of President Trump, someone could even think that with friends like that, who needs enemies?”

Announcing that the EU is to reactivate a statute last used to protect European companies working in Cuba before the US trade embargo was lifted on the Latin American country, European Commission President Jean-Claude Juncker, said in Sofia: "We will begin the 'blocking statute' process, which aims to neutralise the extraterritorial effects of US sanctions in the EU. We must do it, and we will do it tomorrow [May 18] morning at 10:30."

The use of the statute to protect business in Cuba eventually saw the US back down and agree to EU companies continuing to pursue commerce on the island.

Time is of the essence when it comes to saving the nuclear deal, otherwise known as the Joint Comprehensive Plan of Action (JCPOA). The more time it takes to produce tangible results in rescuing the accord, the greater will be the impatience of the hardliners in Iran, who say the country’s centrist-pragmatic President Hassan Rouhani should never have trusted the US enough in the first place to sign the JCPOA in late 2015.

Clock is ticking
The clock is ticking on the salvaging effort given that in three to six months’ time foreign companies that continue to do business with Iran will be exposed to Washington’s sanctions, according to the US Treasury. Tempers may fray if the US gives no quarter as Europe pushes for waivers to shield its companies from the penalties.

Referring to the leaders’ talks in Sofia, Tusk also said: “On the Iran nuclear deal, we agreed unanimously that the EU would stay in the agreement as long as Iran remains fully committed to it.” He added: “Additionally, the Commission was given the green light to be ready to act whenever European interests are affected.”

The ‘blocking statute’ is a 1996 regulation that prohibits EU companies and courts from complying with foreign sanctions laws. It stipulates that no foreign court judgments based on these laws have any effect in the EU.

However, many views expressed at the summit indicated that while the re-adoption of the regulation may help smaller and medium sized European businesses trading with or investing in Iran, it may not be enough to keep big European companies, and especially those with assets in the US or American shareholders, involved with the Iranians. Juncker, for instance, said: “The effects of the US sanctions will be felt. It is the duty of the EU therefore to protect European business and that applies particularly to smaller and medium-size businesses.”

Total heading for the exit
In the biggest blow yet to Iran’s hopes of holding on to European investments despite the US walking out of the nuclear deal, French energy major Total on May 16 said it would abandon the multi-billion dollar South Pars Phase 11 gas field development project in the Persian Gulf unless it can secure a sanctions waiver from Washington with the support of France and the EU. Meanwhile, German insurer Allianz and the world’s largest  container shipping firm, Denmark’s A P Moller-Maersk Tankers, said they were winding down their businesses in Iran, while German giant Siemens said it would not be able to do undertake any new commercial activity with Tehran.

Commenting on the Total decision, French President Emmanuel Macron said on May 17: “We’re not going to force French businesses to stay in Iran. The president of the French republic is not the CEO of Total.”

Macron added: “International companies with interests in many countries make their own choices according to their interests. They should continue to have this freedom... But what is important is that companies, and especially medium sized companies which are perhaps less exposed to other markets, American or others, can make this choice freely.”

EU budget commissioner Gunther Oettinger said it was essential that the EU remain united when it comes to the Trump administration. “One thing is very clear to me: Trump despises weaklings,” he said.