Economy, Domestic Economy

French Business Chief in Iran Sees Bleak European Prospects

French Business Chief in Iran Sees Bleak European Prospects
French Business Chief in Iran Sees Bleak European Prospects

The head of France’s business lobby in Iran said on Friday EU government efforts to protect their companies were unlikely to be adequate.

European leaders want to salvage the 2015 nuclear deal between Tehran and world powers, which lifted most of the international sanctions on Iran in exchange for curbs on its nuclear program.

But EU officials say there is no easy way to protect EU firms and banks from the extraterritorial nature of US sanctions that Washington has reimposed and larger firms have already started signaling their intent to withdraw from Iran.

“Sadly, what we can fear is a mass withdrawal of European firms,” Matthieu Etourneau, managing director of the French Center for Business in Tehran, said at a conference at the French Institute for International Relations, Reuters reported.

“The political proactiveness of governments is good, but we have the feeling that it will not be enough to ensure companies keep their activities in Iran,” he said.

French energy group Total, which arguably signed the most symbolic contract between Iran and western powers since 2016, said on Wednesday it might quit its multibillion-dollar gas project in Iran unless it secured a waiver from the sanctions.

Etourneau said the presence of big companies like Total initially had a ripple effect of bringing smaller companies from the sector into the market, but that its departure would naturally send the opposite signal.

“What we’re seeing develop is that companies will seek exemptions and waivers, but the American stance is so intransigent on the question that we think it’s unlikely they will be granted,” he said.

French President Emmanuel Macron said on Thursday Europe would try to protect its companies doing business with Iran from US sanctions, reimposed on Iran, but said giants like Total would make their own choices.

“International companies with interests in many countries make their own choices according to their own interests. They should continue to have this freedom,” he said on arriving for a second day of EU leaders’ talks in the Bulgarian capital, Sofia.

“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.”

 Skepticism Over

Sanctions Blocking Tool

Among tools being studied, EU officials are trying to revamp a blocking statute to encompass US President Donald Trump’s decision to revive Iran-related sanctions after the expiry of 90- and 180-day wind-down periods, including sanctions aimed at Iran’s lifeblood oil sector and transactions with its central bank.

Etourneau said he was skeptical on its efficiency and the ability to introduce it quickly enough, especially as companies needed to make decisions within the next few weeks to ensure they abide by the wind-down periods.

“We have the feeling that the American position for Iran is regime change so what can you do within that framework?” he said.

Using European Union powers to ban banks in the bloc from complying with US sanctions on Iran would be of “limited” use given the global reach of finance, the EU’s financial services chief said on Thursday.

European Commission Vice President Valdis Dombrovskis said the EU executive was assessing the economic impact and potential effect of US sanctions on Iran, including their effect on EU companies and the financial sector.

The blocking statute bans any EU company from complying with US sanctions and does not recognize any court rulings that enforce American penalties. But, according to Reuters, it has never been used and is seen by European governments more as a political weapon than a regulation because its rules are vague and difficult to enforce, serving mainly as a warning to the United States.

“Indeed, the EU blocking regulation could be of limited effectiveness there, given the international nature of banking system and especially the exposure of large systemic banks to US financial system and US dollar transactions,” Dombrovskis told the European Parliament.

“There are some difficult issues which we will need to address. We are working on how to exactly address those issues,” he added.

On Friday, the BDI industry association said the European Commission’s plans to activate a law that bans European companies from complying with US sanctions against Iran could have a significant impact on German companies operating in the United States.

BDI President Dieter Kempf said in a statement that US President Donald Trump’s decision to pull out of the Iran nuclear deal created significant legal uncertainty for German companies. “The US president’s Iran strategy is at the expense of the European economy,” Kempf said.

  Complicated Financial Activity;

EU Mulls Direct CBI Transfer

Smaller French banks with clients operating in Iran have already started telling those customers they are unlikely to be able to continue providing services after Aug. 6, Etourneau said, adding that sanctions linked to the central bank would make financial activity even more complicated.

“With the absence of banking support, all economic sectors will be impacted, including those which have had exemptions such as health and the food industry,” he said.

Small and medium companies may look to work with Asian affiliates as one option of staying in Iran. “In the short-term, the easiest solution would be for European states to cover the cost of American sanctions imposed on certain companies,” he said.

The European Commission is proposing that EU governments make direct money transfers to Iran’s central bank to avoid US penalties, an EU official said, in what would be the most forthright challenge to Washington’s newly reimposed sanctions.

The step, which would seek to bypass the US financial system, would allow European companies to repay Iran for oil exports and repatriate Iranian funds in Europe, a senior EU official said, although the details were still to be worked out.

“Commission President Jean-Claude Juncker has proposed this to member states. We now need to work out how we can facilitate oil payments and repatriate Iranian funds in the European Union to Iran’s central bank,” said the EU official, who is directly involved in the discussions.

The US Treasury announced on Tuesday more sanctions on officials of the Central Bank of Iran, including Governor Valiollah Seif. But the EU official said the bloc believes that does not sanction the central bank itself.

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