EU sets course for US clash with law blocking Iran sanctions

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European leaders to launch statute to protect EU firms doing business in Iran

Patrick Wintour in London and Daniel Boffey in Sofia

The EU has put itself on a collision course with the US over Donald Trump’s decision to withdraw from the nuclear deal with Iran, as major European firms started to pull out of the country to avoid being hit by sanctions.

In an attempt to shield EU companies doing business with Iran, the European commission president, Jean-Claude Juncker, said he would turn to a plan last used to protect businesses working in Cuba before a US trade embargo was lifted on the Latin American country.

“We will begin the ‘blocking statute’ process, which aims to neutralise the extraterritorial effects of US sanctions in the EU. We must do it and we will do it tomorrow [Friday] morning at 10.30,” he said at the end of a summit in the Bulgarian capital, Sofia.

The EU is seeking to keep Iran in the 2015 accord by safeguarding the economic benefits Tehran gained in return for giving up its nuclear programme.

The “blocking statute” is a 1996 regulation that prohibits EU companies and courts from complying with foreign sanctions laws and stipulates that no foreign court judgments based on these laws have any effect in the EU.

The European Investment Bank will also provide a funding stream for businesses working in Iran.

Juncker said: “The effects of the US sanctions will be felt. It is the duty of the EU therefore to protect European business and that applies particularly to smaller and medium-size businesses.”

The European council president, Donald Tusk, added at a meeting of EU leaders: “We agreed unanimously that the EU will stay in the agreement as long as Iran remains fully committed to it. Additionally the commission was given a green light to be ready to act whenever European interests are affected.”

Tusk, who accused Trump’s administration of “capricious assertiveness” earlier in the week, told reporters: “The problem is if your closest friend is unpredictable. It is not a joke now. This is the essence of our problem now with our friends on the other side of the Atlantic. I can agree with President Trump when he said unpredictability can be a very useful tool in politics. But only against enemies and opponents. Unpredictability is the last thing we need with friends and family.”

Despite the tough diplomatic rhetoric, however, the chances of the Iran nuclear deal surviving the impact of US sanctions were dealt a blow when the Danish shipping group A P Moller-Maersk said it was joining an exodus of companies ceasing commercial activity in Iran.

Maersk, the world’s largest oil shipping container firm, said on Thursday it would honour customer agreements entered into before 8 May, but then wind them down by 4 November, as required by the reimposed US sanctions.

The announcement came after the French oil firm Total announced on Wednesday that it was going to pull out of its 50.1% stake in the South Pars 11 oil field. Total said it would only retain its investment if the US gave it a specific exemption from the planned sanctions. Its joint venture partners in China are likely to take over its share of the investment.

Iran’s oil exports were at 1m barrels a day, mostly to Asia and some European countries, before sanctions were lifted. They subsequently climbed to 2.5m barrels.

Maersk operates more than 160 vessels and employs 3,100 people worldwide with a turnover of $836m in 2016.

The speed at which firms operating in Iran are pulling out is threatening to wreck EU leaders’ plans to provide legal and financial guarantees to protect European firms that keep trading with Iran.

The German chancellor, Angela Merkel, admitted that the EU was limited in what it could do.

She said: “We can see whether we can give small and medium-sized companies certain relief. That is being examined … As for compensating all businesses in a comprehensive way for such measures by the United States of America, I think we cannot and must not create illusions.”

Commenting on the Total decision, the French president, Emmanuel Macron, said: “We’re not going to force French businesses to stay in Iran. The president of the French republic is not the CEO of Total.”

The Iranian government has warned that any exodus of EU investment would force it to pull out of the nuclear deal preventing it from enriching uranium.

The heart of the Iran deal – which Trump branded “horrible” as he pulled out of it earlier this month – was an Iranian commitment to end its nuclear programme in return for greater trade with the west.

The danger is that the dispute over Iran will spill into a wider row between the EU and US over trade, and events will gather their own momentum as the US starts to impose sanctions on key Iranian figures.

In a bid to keep the dispute from spiralling out of control, EU political ambassadors travelled to New York and Washington to urge the US to give carve-outs to EU firms from its sanctions policy. They are also warning the US administration that economic chaos imposed on Iran will be counter-productive, and is more likely to strengthen hardliners than lead to a regime change of benefit to the west.

Günther Oettinger, the EU budget commissioner, urged the EU to remain united. “One thing is very clear to me: Trump despises weaklings,” he said.

 

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