EIB Casts Doubt on European Plan to Salvage Nuclear Deal

The European Investment Bank’s global operations would be put at risk if it were to invest in Iran, its president said on Wednesday, casting doubt on the EU’s ability to deliver on its pledge to save a nuclear deal with Tehran that Washington has abandoned.

An EU plan urging its lending arm to invest in Iran as part of efforts to help keep money flowing to Tehran is proving difficult to implement as businesses fear the reimposition of US sanctions, Reuters reported.

EIB President Werner Hoyer said that while he supported EU efforts to keep alive the 2015 deal, Iran is a place “where we cannot play an active role”.

The EU’s not-for-profit lender fears any dealings with Iran would jeopardize its ability to raise money on US markets and have far-reaching consequences for its operations.

Hoyer said EIB is indebted by €500 billion ($581 billion) in bond issues.

After US President Donald Trump pulled out of the Iran deal with world powers on May 8, Iran has threatened to stop complying with curbs on its nuclear program if it fails to see the economic benefits of relief from sanctions under the deal.

Upping the stakes on that threat, the head of Iran’s atomic agency said on Wednesday that the country has built a factory that can produce rotors for up to 60 centrifuges a day.

The other signatories to the deal-the European Union, China and Russia-want to salvage the accord to prevent Tehran from developing its nuclear program.

EU measures to compensate the impact of US sanctions and guarantee Iranian oil revenue include EIB lending, a measure to shield EU companies from US secondary sanctions, state-backed export guarantees and a plan that European governments make direct money transfers to Iran’s central bank.

It has also sought US waivers from sanctions for big European businesses, which the US has rejected.

While the European Union has agreed to add Iran to the list of countries with which the Luxembourg-based EIB does business from August, a spokesman for the EU executive said the change “does not force EIB to begin lending”.

EIB will only do business there if it receives approval from its board of governors, which are the finance ministers of the EU’s 28 member states, and on the basis of finding suitable projects to invest in.

Central bank transfers to Iran to pay for oil imports and avoid US sanctions, a measure proposed by the European Commission in May, are still under discussion, diplomats said.

Meanwhile, few businesses have taken advantage of euro-denominated financing set up by European countries to trade with Iran.

Italy’s new state-owned entity to guarantee credits to companies in Iran, Invitalia, has a scheme in place but no firms have made use of it.

In Britain, the situation is similar. Accounts show that no sterling or euro credits have been provided to British companies exporting to Iran in the 2017-18 financial year.

EU officials hope their so-called blocking statute to take effect in early August will shield small- and medium-sized businesses working in Iran. The statute bans any EU company from complying with US sanctions and does not recognize any court rulings that enforce American penalties.

But they admit that the risk for global firms would be too high to remain without waivers.

Major companies such as French carmaker PSA Group have already announced that they are winding down operations in Iran.

“PSA made its decision with regard to the new US sanctions, in order to be in conformity with American regulations,” a company spokesman said on Wednesday.

> “No Exemptions”

In the biggest blow yet to EU efforts, US Secretary of State Mike Pompeo wrote to EU foreign policy chief, Federica Mogherini, this month rejecting a request for carve-outs for European companies, although she played down its importance on Monday and said that EU work would continue.

“The set of measures we have been putting in place ... allow us to guarantee that Iran continues to benefit from the economic benefits coming from the implementation of the agreement,” Mogherini said.

Europe says there is nothing to be gained from pulling out of a deal that placed limits on Iran's nuclear fuel production and with which Tehran is complying.

Hoyer’s comments are another blow to the EU’s plans, while Washington is telling its allies they must halt all imports of Iranian oil from Nov. 4 or face US financial measures, with no exemptions.

“There is no European bank which is presently able to do business in and with Iran,” Hoyer told reporters.

“We have to take note of the fact that we would risk the business model of the bank if we were active in Iran.”

EIB currently steers clear of engaging in jurisdictions listed as high-risk under the FATF, a global group of government anti-money-laundering agencies. That includes Iran.