In the two years following the signing of the Iran deal many banks around the EU joined the parade of financial institutions racing towards the Iranian market, and many companies seized the opportunity and establish themselves in Iran benefitting from the financial sanctions relief. Sensitive enough, giants of the aerospace industry Boeing and Airbus were amongst the first to undertake negotiations leading to agreements on sales of 80 and 100 jetliners respectively.
The bullet-proof reassurance that the deal is working came when oil and gas giant Total signed a 20-year contract worth $5bn with Iran for the development of phase 11 of the South Pars gas field in Persian Gulf in a consortium with Chinese state-owned oil and gas company, and a subsidiary of National Iranian Oil Company.
With the election of President Trump across the Atlantic, some concerns began to be raised. There were talks of the inefficiency of the Iran deal from American leadership, which now seemed much more real than the campaign period and it casted a shadow of doubt over the economic opportunity. Concerns turned into reality when arrived the much-feared, dream-shattering unilateral withdrawal of the US from the deal last month, despite relentless efforts of their closest allies; UK, France, and Germany.
Now what does this mean? Is the deal completely dead? Are we back to pre-deal era? What about companies who have already entered the market or were testing the waters to do so?
The Iranian side, having complied with its obligations according to IAEA, the UN’s nuclear watchdog, interprets the US withdrawal as a massive change in the give and take mechanism provisioned in the deal and holds the remaining parties in the deal responsible for bringing the balance back. As Iran ambassador to the EU Peyman Sa’adat explained in an interview with Iralux “it is very important for Iran to be able to benefit from its compliance with the deal and the EU’s role here is of utmost importance to reassure that Iran will indeed benefit”. It is important to keep in mind that this deal was ratified as a multilateral deal and the United States’ unilateral departure from the deal does not nullify it. Moreover, the Iranian side has held up their end of the deal according to numerous reports from the IAEA.
Nevertheless, it is no secret that the overwhelming economic reach of United States and its use of extraterritorial power in pressuring others is something we all have to deal with for the moment. So, what is the solution?
Total’s Patrick Pouyanné says that the chances of a waiver from returning US sanctions on Iran are “very slim”. What this means for Total, the giant in oil and gas, is that they will only have a slim chance of being able to follow through their deal with Iran. The fact we cannot ignore is that Total, or big players like Total, are too big for anyone to help save. Neither France nor probably Europeans altogether will be able to protect Total’s interest as they simply have too much at stake in the US at the reach of the American Treasury, being the enforcing body of the United States when it comes to sanctions.
On a brighter note the European countries, who are now in an inevitable position of safeguarding the Iran deal, have jumped to protect the deal through strategic moves which the Americans cannot counter nor denounce. Moves like providing funding and protection for small and medium size enterprises. Protection of companies which, in fact, have no relationship with the United States and do not deal in US dollars either. This shield does not protect everyone who is willing to work with Iran, but let’s not forget that the Eurozone economy is driven by 70% plus SMEs and that says something.
Safeguarding the JCPOA
For a starter, reassuring enough for European SMEs, Federica Mogherini in the latest efforts in safeguarding the JCPOA remarked that the Iran nuclear deal can survive without the United States’ support. She said: “We are determined to keep this deal in place”. The Iranian side has of course repeatedly confirmed their commitment to the deal.
Furthermore, after 15 May meetings in Brussels with foreign ministers of UK, France and Germany and also Iran foreign minister Zarif, Mogherini said that intensive discussions are being undertaken addressing among others: maintaining and deepening economic relations with Iran; effective banking transactions with Iran; continued sea, land, air and rail transportation relations with Iran; further provision of export credit and development of SPVs in financial banking, insurance and trade areas, to facilitate economic and financial cooperation, including by offering practical support for trade and investment; as well as further investments in Iran. And most importantly the protection of EU economic operators and ensuring legal certainty.
Together with vigilance and adequate due diligence, these measures make for powerful binoculars for European actors in averting the risks of doing business with Iran when it comes to being sanctioned by the United States while, so far, not even their closest allies have pledged allegiance.