US Sanctions against Iran: European Companies are the Big Losers

Contracts worth tens of billions of Euros are now void. The profiteers: Russia, China and the USA.

Contracts worth tens of billions of Euros are now void. The profiteers: Russia, China and the USA.

The exodus from Iran is almost complete, reports Mehrdad Emadi, who has been advising institutions and European companies on business with Tehran for decades. He looks back at the last weeks and recaps: «Total says goodbye. The Renault group gives up after three decades, as well as Peugeot Citroën PSA, but also Continental, Fiat and the power company Eni from Italy. They all had agreements or drawn up contracts. ”

Multi-billion contracts fizzle into nothing

Adidas does not even dare equip the Iranian football team. So great is the fear of being seen by the US as a sanction breaker. In addition to the € 22 billion value of goods in drawn up contracts, Letters of Intent worth 35 billion Euros are affected. All of this will not be worth anything on the morning when US sanctions on Iran resume.

The current situation is more dramatic than it was in the past, because the sanctions imposed unilaterally by the Trump government in May are broader than the old sanctions before 2015, the Iranian expert explains. And prophesies that Europe’s trade with Iran will almost completely dry up: “Nobody will dare approach Iran, no one will want to do business in Iran.”

“Trump especially wanted to target Europe”

Former Swiss ambassador to Iran, Philippe Welti, believes that the sanctions of the Trump government were aimed primarily at Europe: “All successful exporters from Europe working in Iran are also present in the US market.”

The use of the dollar, gold and silver will be banned in doing business with Iran. Almost all banks have already suspended payments and terminated accounts. Industrial goods containing steel or aluminium may no longer be supplied. This affects almost all machine exports; an area where Europe is traditionally strong.

Middle East expert Philipp Andrée of the German Chamber of Industry and Commerce agrees: “With the re-activation of US sanctions, European industry is definitely one of the big losers, since the Europeans had quickly reactivated their trade relations with Iran in 2015. Politicians have asked Companies to be proactive!

Even suppliers affected

But with Trump, a scenario has arisen that no one would have expected, Andrée says: “For European companies, this is a very sharp sword and leads to massive problems. Unfortunately, the European Union is unable to defend itself and take action by implementing effective measures. »
Everything started hopefully: The six largest industrial nations in the EU increased their exports from four to over ten billion Euros in two years. This is not surprising, because Iran is economically attractive – with 80 million mostly well-educated consumers.

US sanctions will be more effective this time, because the US has newly set up a so-called third party effect: companies violate US sanctions even if they withdraw from Iran, but still have suppliers active there. This requires an immense amount of control mechanism from large European corporations.

Moscow and Beijing are ready

For Iran, the loss of business with the Europeans is particularly bad, explains Emadi, because they would again be driven into the arms of Russia and China. These two countries are the big beneficiaries of US sanctions.

For example, Russians could sell more oil on the world market and deliver overpriced gas to Iranians. According to Emadi, the Chinese will – as before 2015 – bring all those products into Iran that would not otherwise be accepted in the world because they do not meet hygiene or safety standards. But the US is also benefiting from its Iran sanctions, by being able to sell more of its own oil on the world market.

By Charlotte Jacquemart

Translated into English from the original German for ICOTeam