US President Donald Trump’s decision last week to withdraw from the Iran nuclear deal has put the European powers on a collision course. Major business organizations doing business in Iran have started to vacate the country to avoid being hit by the looming economic embargo. To protect major European companies plying their trade in Iran, the EC had announced that it would turn to lessons learnt from Cuba before the US sanctions were lifted in the Caribbean country.
At a summit in Sofia, EC President Jean-Claude Juncker emphasized the need to protect European businesses from United States economic sanctions. This will be accomplished by amending the Blocking Statute and funding for companies operating in Iran. The 1996 Blocking statute is a regulation that allows European firms to ignore any foreign sanctions and any rulings in foreign courts do not affect the European Union. Companies operating in Iran will get steady funding from The European Investment Bank.
However, the effectiveness of the EC’s measures to get through the US embargo unscathed was further undermined by some European companies withdrawing their operations from Tehran. Denmark’s Maersk Shipping Group was one of the firms that pulled out of Tehran. The transport, logistics and energy business conglomerate announced on Thursday that it would complete operational agreements entered before May 8th, but wind down on them by the 4th of November as required by the sanctions imposed by the US.
Earlier this week, Total announced that it would withdraw from its 50.1% stake in the South Pars 11 oil field, jointly owned with China. Iran’s oil market grew significantly after the sanctions were lifted, from exporting 1M barrels per day to a peak of 2.7M barrels. The relentless and increasing pull-out of European firms from Iran is further undermining the EU’s plans to shield them legally and financially in their Iranian operations.
The EU is limited in its capabilities in this situation, admits Angela Merkel, who believes that compensation for businesses affected by the United States’ harsh embargo on Iran is an “illusion”. On the other hand, Tehran has warned that the withdrawal of European investment will, in turn, lead to its revocation of the nuclear deal and renewed activities of uranium enrichment.
To safeguard their business interests in Iran, ambassadors from the EU have met with the Trump administration in Washington and New York to pressure the US to give exemptions to EU companies from its sanctions on Iran. However, only time will tell how the effects of this embargo will be felt across Europe and in the rest of the world.