Domestic Economy

EU Threatens Firms With Sanctions for Ending Business With Iran

If European companies abide by US secondary sanctions, they will be sanctioned by the EU
Nathalie TocciNathalie Tocci
The European measures are aimed at allowing firms to recover damages from bodies that enforce American sanctions, and ban companies from complying with the sanctions without EU permission

European firms that stop doing business with Iran because of reimposed US sanctions could in turn be sanctioned by the EU, a special adviser to the 28-country bloc’s top diplomat has warned.

“If EU companies abide by US secondary sanctions they will, in turn, be sanctioned by the EU,” Nathalie Tocci, an aide to EU foreign policy chief, Federica Mogherini, told Britain’s BBC Radio 4 on Monday night.

She characterized the measures as an attempt to “protect European companies”, NBC News reported.

Tocci said the move was “necessary in order to signal, diplomatically, to the Iranians that Europeans are serious” about trying to salvage the Iran nuclear deal.

Hours earlier, the US announced it was reintroducing sanctions on the Islamic Republic.

The US administration’s decision to walk away from the landmark 2015 Iran pact signed by the five permanent members of the UN Security Council—the US, Russia, France, China and the UK—as well as Germany and the European Union, dismayed and angered longtime US allies and vital trading partners.

German Chancellor Angela Merkel, French President Emmanuel Macron and British Foreign Secretary Boris Johnson traveled to the US aiming to convince US President Donald Trump not to ditch the deal, saying it was working and the only way to halt a regional arms race.

Nevertheless, Trump went ahead and announced on May 8 that the US was withdrawing from the agreement.

Mogherini said the EU is encouraging enterprises to increase their business with Iran, as the country has been compliant with their nuclear-related commitments.

Mogherini told reporters Tuesday during her trip to Wellington, New Zealand, that it’s up to Europeans to decide who they want to trade with.

“We are doing our best to keep Iran in the deal, to keep Iran benefiting from the economic benefits that the agreement brings to the people of Iran because we believe this is in the security interests of not only our region, but also of the world. If there is one piece of international agreements on nuclear non-proliferation that is delivering, it has to be maintained,” Mogherini was quoted by AP as saying.

Trade between Iran and the EU “is a fundamental aspect of the Iranian right to have an economic advantage in exchange for what they have done so far, which is being compliant with all their nuclear-related commitments.”

Latest Eurostat data show trade between Iran and the 28 member states of the European Union during the first half of 2018 amounted to more than €8.3 billion, registering a 12.8% decrease compared with last year’s corresponding period.

Iran exported €4.68 billion worth of commodities to the EU members during the period, indicating a 2.2% fall and imported €3.61 billion in return, down 23.7% year-on-year.

Germany’s Economy Ministry said on Monday the country will continue to offer export and investment guarantees for companies doing business with Iran, adding Berlin remained in dialogue with the US on exemptions for German companies from Iran sanctions.

“Export guarantees and investment guarantees from the Federal Ministry of Economics are still available to companies,” the ministry said.

Tocci conceded that potential EU sanctions as part of the so-called “Blocking Statute” that came into effect on Tuesday were “politically and symbolically” an important step.

The European measures are aimed at allowing firms to recover damages from bodies that enforce American sanctions and ban companies from complying with the sanctions without EU permission.

  “Specific Authorization”

Tocci’s remark had been echoed by European Commission Spokeswoman Mina Andreeva who told reporters in Brussels on Monday that EU firms are banned from following US demands to cut business ties with Iran, unless specifically authorized to do so.

The Blocking Statute, which took effect on Tuesday, stops European companies from complying with the US sanctions unless they have authorization from the commission.

National governments could impose “effective, proportionate and dissuasive penalties” on any of their companies that cave in.

The statute also blocks the effects of US court actions in Europe and allows European firms to recover damages arising from the sanctions from anyone who causes them.

“It (the Blocking Statute) also forbids EU persons from complying with those [US] sanctions unless exceptionally authorized to do so by the commission,” Andreeva was quoted as saying by EUobserver.

She said such exceptions can be made in cases where “non-compliance seriously damages their interests or the interests of the European Union”.

The commission says such US sanctions are illegal and refuses to abide by them, noting that it intends to maintain trade and economic relations with Iran as part of the hard-won 2015 deal, signed by the so-called ‘P5+1’ powers, namely the five permanent members of the UN Security Council (the US, UK, China, France and Russia), plus Germany.

This also means that EU firms won’t be able to react to the American threat without facing penalties at home.

The European Commission said it will grant exceptions if the company can prove that it is leaving Iran for reasons not linked to the US threat.

“If the authorization is rejected, then the company shall not comply with US law and if it does, it is subject to the penalties foreseen by each member state,” said one EU senior official.

Fines vary from EU state to EU state, and must be “effective, proportionate and dissuasive”.

The Blocking Statute applies to anyone, foreign or otherwise, who is a resident in the European Union and also does business in Iran. This includes companies incorporated in the EU and ships registered in an EU state or fly an EU member state flag.

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