Losing the Iran Game: European Companies Likely to Curb Business with Islamic Republic

Written by | Friday, August 17th, 2018

US sanctions on Iran are making it very difficult for the foreign companies to operate in the country, business leaders say. Germany carmaker Daimler AG has announced that it is putting off its expansion plans in Iran due to the sanctions and it is likely not the last EU company to tame their plans for doing business with Tehran.  Director for International Relations at BusinessEurope, Luisa Santos, said that there was a lot of willingness among European companies to do business with Iran but  “under these conditions it is very difficult”.

Therefore, the “most likely scenario” is that European companies will refrain from engaging in commercial activities with the country, Ms Santos said. Although Brussels believed that small and medium sized businesses could not be exposed to the impact of US sanctions that much, Ms Santos disagrees. “I will not say that they are in a better situation than the big companies. In a way, they have an even weaker position and it will be also very difficult for them to remain in Iran,” she insisted.

The EU is trying to soften the impact of sanctions on European companies. It introduced the Blocking Statute – a mechanism that bans companies from complying with the sanctions – unless given an exceptional waiver. This allows EU operators to recover damages arising from American sanctions and make any ruling of a foreign court regarding the sanctions invalid within the EU.  “The main problem is that our legislation has no extraterritorial effect. Meaning that there might be some shielding on EU soil but there is no shielding on US soil,” Ms Santos said. Many firms do not only do business in Iran but also in the US, where the blocking statute regulation does not apply. “They have to think what market is more important for them, is it the US or is it Iran? I sure we all know the answer to that,” she further pointed out.

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