(Non)Compliance with US Sanctions: Protecting European Businesses in Iran

Written by | Wednesday, August 8th, 2018

The European Union is trying to mitigate the impact of US sanctions on Iran after the White House withdrew from the nuclear deal and re-imposed the punitive measures on 6 August. The EU has updated its ‘blocking statute’ to lessen the repercussions on the country and its own businesses. “Sanctions will go into full effect and will remind the Iranian regime of the diplomatic and economic isolation that results from its reckless and malign activity,” said US Secretary of State Mike Pompeo in May.

The White House’s decision will have a major impact on EU companies operating in Iran in the form of extraterritorial sanctions, which the EU deems illegal. “They seek to determine the conduct of our economic operators while they are not subject to US law,” an EU senior official said. Federica Mogherini, the head of European diplomacy, said that the EU was determined to protect European economic interests in the country. As a pre-caution, the EU introduced the restrictive measures in its “blocking stature” which essentially bans European companies and individuals to comply with US sanctions.

Brussels can eventually authorize an economic actor to comply with the US sanctions – fully or partially – as long as “non-compliance would seriously jeopardize the interests of the operator or of the European Union”. If an EU company makes a decision to comply with the sanctions without authorization, member states can impose “effective, proportionate and dissuasive penalties,” as well as enforce them. Moreover, the blocking mechanism does not recognize any court ruling that enforces Washington’s sanctions. EU officials say that whether to comply with the US sanctions or keep doing business with Tehran is a purely economic call.

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