EU looks to protect firms as Trump warns Iran’s trading partners

Large French car and oil companies are among those concerned by US imposed Iran sanctions.

French oil giant Total is among Europe's companies concerned by Iran sanctions REUTERS/Charles Platiau

The EU is to bring in in legal cover for firms in the 28-nation bloc to work with Iran after the Trump administration rejected European calls for an exemption. A statement by the EU diplomatic chief Federica Mogherini and the foreign ministers of Britain, France and Germany said it would also work to keep "effective financial channels" open with Iran

"We are determined to protect European economic operators engaged in legitimate business with Iran" the statement added. "This is why the European Union's updated Blocking Statute enters into force on 7 August to protect EU companies doing legitimate business with Iran from the impact of US extra-territorial sanction.’’

The "blocking statute'' forbids EU firms from complying with US sanctions, allowing them to recover damages from such penalties and nullifying any foreign court rulings against them.

Meanwhile, President Donald Trump warned countries against doing business with Iran on Tuesday as he hailed the "most biting sanctions ever imposed", triggering a mix of anger, fear and defiance in Tehran. "Anyone doing business with Iran will NOT be doing business with the United States. I am asking for WORLD PEACE, nothing less,’’ the US President said.

French carmaker Renault, which does not sell cars in the US, is now considering its position in Iran. French oil group Total and carmaker PSA have already indicated they are likely to pull out of Iran.

Renalt recently indicated that ''Iran operations are likely to be put on hold'' to comply with U.S. sanctions,  according to Renault Chief Operating Officer Thierry Bollore, who spoke to analysts during a conference call about earnings last week.
“We are looking to new business opportunities, particularly in Africa, with strong growth to offset the missed opportunities in Iran,” he added.

Since debilitating sanctions were eased in 2016, Iran emerged as a hot spot for growth, and trade with Europe surged to more than $10 billion. Now that the U.S. has canceled a 2015 nuclear accord with the Iran  and re-imposed trade curbs, companies are rushing back out.

Renault’s French rival, PSA Group, which makes Peugeot and Citroen cars, also suspended its push in the country and have indicated that they are likely to pull out

French energy giant Total has yet to permanently pull out of Iran following the renewal of U.S. sanctions, but its CEO Patrick Pouyanne a number of weeks ago,  sounded a pessimistic note about his company's prospects in the country.

Total positioned itself to develop a portion of the world's largest natural gas following the lifting of the sanctions . However, the company is now preparing to abandon the Persian Gulf project unless the U.S. government issues the company a sanctions waiver. That would protect Total from so-called secondary sanctions, which the United States can use to punish foreign companies that engage in prohibited activity with Iran.

 "There's not a single international company like Total who can work in any country with secondary sanctions. I don't have the right. It's just the reality of the world," their CEO told CNBC at an OPEC seminar in Vienna recently.  Pouyanne said that the U.S. could decide that Total could not have access to any U.S. financing, making it impossible for a company like Total to do business without having access to U.S. financing or to U.S. shareholding.

Total have acknowledged that its position probably does not sit well with Europe's leaders, as the EU attempts to salvage the nuclear deal by passing measures aimed at protecting the bloc's firms that have business dealings in Iran. European firms have been instructed that they should not comply with demands from the White House for them to drop all business with Iran. Those who decide to pull out because of US sanctions will need to be granted authorisation from the European commission, without which they face the risk of being sued by EU member states. A mechanism has also been opened to allow EU businesses affected by the sanctions to sue the US administration in the national courts of member states.

The US reimposition of sanctions on Iran come after President Donald Trump pulled out of the 2015 nuclear pact.In 2015, Iran agreed a long-term deal on its nuclear programme with P5 plus 1 of world powers.