PARIS/MUNICH (Reuters) - European governments vowed on Wednesday to try to shield their improved economic ties with Iran from the impact of renewed U.S. sanctions, but business leaders struck a more pessimistic note.
The EU said it remained committed to the 2015 Iran nuclear deal and the suspension of its own sanctions, the day after President Donald Trump announced Washington’s withdrawal from the pact. French Foreign Minister Jean-Yves Le Drian also insisted the deal was “not dead”.
However, companies with active Iranian investments or plans mostly stayed quiet on the viability of those projects beyond a “wind-down” period of three to six months until the United States reimposes sanctions on entities doing business with Tehran.
Siemens is still “assessing the implications of the Iran decision”, the German industrial giant’s Chief Financial Officer Ralf Thomas told reporters on a call.
“One of the strongest industrialized countries in the world has made a political decision - as an industrial company we have to recognize that,” Thomas said. Existing projects will be completed “as far as legally possible”, he added.
Trump’s move will lead to the reimposition of U.S. penalties that were waived under the three-year-old nuclear deal, including financial sanctions that had made it extremely difficult for global companies to do business with or in Iran.
France is seeking an understanding with the U.S. to safeguard its carmakers’ significant Iran investments, a government official said. PSA, which sold 445,000 vehicles in Iran last year, called on the European Union to maintain a united front in defense of the nuclear agreement.
Germany’s BDI industry association also said the EU, Russia and China should commit clearly to the deal, after Washington’s new ambassador ruffled feathers by tweeting: “German companies doing business in Iran should wind down operations immediately.”
The nuclear detente had sparked great hopes for the opening of the Iranian market, BDI head Dieter Kempf said. “These hopes have now clearly been dimmed.”
Government and company officials said business with Iran had slowed recently in anticipation of Washington’s likely withdrawal from the deal.
France, Germany and Italy have introduced euro-denominated export guarantees designed to avoid U.S. dollar exposure and withstand sanctions, while the EU may resort to sanctions-blocking statutes ordering companies not to comply.
In updated advice to businesses, however, the British government said: “How UK companies act in response to U.S. sanctions is a commercial and legal decision for that company.”
The renewed sanctions “may have implications for UK businesses and individuals dealing with Iran”, it added.
British exports to Iran rose nearly 40 percent in 2016 to 262 million pounds ($356 million), dwarfed by the 3 billion euros of German exports recorded last year, up 15 percent.
Volkswagen, which resumed exports to Iran in 2017, said it was monitoring the situation closely.
Some European banks that had resumed financing Iranian entities after the nuclear deal said they had already stopped doing so in anticipation of Trump’s move.
“During recent months the operational and reputational risks associated with doing business in Iran have increased,” Danske Bank’s spokesman Kenni Leth said.
“Earlier this year we decided to phase out and exit all activities to and from Iran and suspend our existing relations with Iran.”
Austria’s Oberbank decided last November not to provide financing to Iranian counterparts “due to the constantly changing political framework,” a spokesman said.
Germany’s Hermes export guarantee scheme for Iran remains in place for the time being, the country’s economy ministry said.
But France’s export finance program, which had been due to launch in May-June, has been “put on hold” in recent weeks pending Trump’s decision, several French officials told Reuters.
Euro-denominated export finance is still being discussed, an Elysee official said, “but it’s not necessarily that simple”.
The bpifrance sovereign fund, which was due to administer the scheme, declined to comment.
French officials will be focused on helping companies exit Iran within the wind-down periods, said one - or on seeking unlikely U.S. waivers or assurances for activities they want to pursue beyond the deadlines.
Companies “will have to choose between their Iranian economic interests and their potential U.S. interests,” said a senior diplomat. “Generally that decision is quickly made in favor of the U.S.”
That is precisely the kind of risk calculation the Trump administration appears to be banking on.
“Companies should not do business in Iran,” a U.S. State Department official said in a phone briefing for reporters on Wednesday, when asked whether foreign business interests could be damaged as an unintended consequence of sanctions.
“That’s an intended consequence, and we thank our ambassador out there for reaffirming that message.”
Writing by Laurence Frost; Additional reporting by Gilles Guillaume, Michael Nienaber, Mathieu Rosemain, David Milliken, Teis Jensen and Kirsti Knolle; Editing by Sudip Kar-Gupta and Keith Weir