EU jumpstarts measures to protect companies investing in Iran

Monday, 21 May 2018 19:30
Commission President Jean Claude Juncker during a joint press conference in Sofia on 17 May Commission President Jean Claude Juncker during a joint press conference in Sofia on 17 May © European Union, 2018
With a reputation of a slow-working institution which only gets its act together in face of an urgent crisis, the speedy reaction of the EU to preserve the nuclear deal with Iran and protect the interests of European companies investing in Iran has taken even experienced observers by surprise.
Maybe this is another proof, as economic history professor Paola Massa writes in an anthology about the House of European History, that trade has remained a cohesive force even when political and military conflicts threatened to tear Europe apart.

At an informal meeting in Sofia last week (16 May), European Commission President Juncker and High Representative/Vice-President Mogherini presented proposals to EU leaders on how to protect EU’s economic interests in face of US sanctions against trade with Iran. Reportedly they received unanimous backing for going forward.

European Council Donald Tusk ignored a question at the press conference in Sofia about the risk of doing business with an unpredictable Iran. Instead he talked about the unpredictability of the US that withdrew from the Joint Comprehensive Plan of Action (JCPOA) – the Iran nuclear deal.

Juncker said that it was a duty to protect European businesses, “especially SMEs”. "In Sofia, we saw a show of European unity. As long as the Iranians respect their commitments, the EU will of course stick to the agreement of which it was an architect,” he said.

Fuelled by a sense of being bullied by the US administration, EU announced already last Friday (18 May) a number of measures to defend its economic interests and to keep Iran in the deal. The aim is to have most of the measures in force before 6 August 2018, when the first batch of US sanctions will take effect.

Whether the measures will work and how much they will cost the EU budget is apparently not clear at this stage.

The most uncertain measure is launching the formal process to activate the so-called blocking statue from the 90-ies. The statue forbids EU companies from complying with the extraterritorial effects of US sanctions and allows companies to recover damages arising from such sanctions.

At a technical briefing, Commission experts admitted that the statute is vaguely drafted and that a European company can end up with being fined by the EU for not breaking the US sanctions against Iran.

Another measure is launching the formal process to remove obstacles for the European Investment Bank (EIB) to decide under the EU budget guarantee to finance activities outside the EU, in this case in Iran. Normally the budget guarantee has not been activated in other countries but Iran might be different.

The Commission is also encouraging Member States to explore the possibility of one-off bank transfers to the Central Bank of Iran. This could help the Iranian authorities to receive their oil-related revenues, writes the Commission.

The Commission did not lose any time and dispatched its energy commissioner, Miguel Canete, to Teheran already during the weekend in a show of confidence building. Unusually for EU-Iran meetings, this time the meeting ended with a joint press statement on nuclear safety cooperation and “the strengthening of ties at all levels”.

A spokesperson for the European External Action Service told The Brussels Times that the lifting of sanctions has facilitated trade and economic relations with Iran. In 2016 - the first fiscal year after the JCPOA implementation - EU imports from Iran reached €5.5 billion (+345%) and EU exports amounted to €8.2 billion (+28%).

In 2017, EU imports from Iran went beyond €10.1 billion EUR and exports to Iran peaked at €10.8 billion. Still this is only a fraction of total EU trade. According to Eurostat (newsrelease 28/2018) total extra-EU28 exports and imports with third countries amounted to €1 879 billion respectively €1 854 billion in 2017.

EU genuinely believes that keeping the deal is “essential for preserving peace in the region and the world”, as Juncker said. Another basic assumption is that the deal and sanction relief will strengthen the reformists against the hardliners inside in Iran and promote economic development in the country to the benefit of its population.

However, in focussing on defending its narrow economic interests in Iran, EU is turning a blind eye to what is going on in Syria, where the Assad regime remains in power with mainly Iranian support and is carrying out demographic changes aimed at preventing the millions of refugees from ever returning home.

EU is also relying on or favouring Iranian individuals, the face of its foreign policy, and ignoring the fact that Iran is ruled by the hardliners and the religious establishment. The threats against Europe emanating from Iran’s actions in Syria – the risk of war and the perpetuation of the refugee problem – are as real as the loss of EU contracts in Iran.

The Brussels Times asked the spokesperson whether EU was concerned about Iran’s actions in Syria and whether anyone raised the issue at the informal EU leaders’ meeting in Sofia. She replied that “the EU is addressing other issues and concerns, including ballistic missiles and its regional role, with Iran outside of the JCPOA”.

Whether EU leaders discussed the other issues or not, German newspaper Die Welt reported on Sunday that a meeting will take place in Vienna on Friday with diplomats from EU, the United Kingdom, Germany, France, China and Russia to discuss next steps after the US withdrawal from the deal. Iran will apparently join the meeting.

Die Welt quoted an unnamed senior EU official as saying that the diplomats would discuss a proposal for a new deal with Iran on economic support in exchange for restraining its ballistic missiles programme and interference in the region. Other EU sources however denied that this would be the purpose of the meeting.

At today's press briefing in Brussels (22 May), a Commission spokesperson declined to confirm the purpose of the meeting.

It is unlikely that Iran would agree to renegotiating the deal but it is worth a try to fix it. The deal was not comprehensive from the start and has paved the way for Iran’s interference in Syria.

M. Apelblat
The Brussels Times

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