Pro­tect­ing EU com­pa­nies in Iran

Iran Daily - - National - By Kostis Geropou­los*

The Euro­pean Union is tak­ing steps to pro­tect EU com­pa­nies in­vest­ing in Iran from re­newed US sanc­tions on Tehran af­ter Pres­i­dent Don­ald J. Trump de­cided to uni­lat­er­ally with­draw from the Iran nu­clear deal late last month.

The Euro­pean Com­mis­sion said it has adopted an up­date of the Block­ing Statute and of the Euro­pean In­vest­ment Bank (EIB)’S Ex­ter­nal Lend­ing Man­date. The move fol­lows up on the in­for­mal Lead­ers’ Meet­ing in Sofia, as well as the Com­mis­sion’s an­nounce­ments of May 18.

“These mea­sures are meant to help pro­tect­ing the in­ter­ests of EU com­pa­nies in­vest­ing in Iran and to demon­strate the EU’S com­mit­ment to the Joint Com­pre­hen­sive Plan of Ac­tion (JCPOA),” the Com­mis­sion said in a press re­lease.

Since the orig­i­nal in­ter­na­tional sanc­tions were lifted in Jan­uary 2016 af­ter the deal on Iran’s nu­clear pro­gram, Tehran has sought for­eign in­vest­ment to help the Is­lamic Repub­lic raise its oil pro­duc­tion to above 4 mil­lion bar­rels per day by up­grad­ing its in­fra­struc­ture and help fi­nance new projects in the oil and gas sec­tor. Iran ranks sec­ond in the world in nat­u­ral gas re­serves and fourth in proven crude oil re­serves.

“Through the up­date of the Block­ing Statute, the ex­trater­ri­to­rial sanc­tions that the United States will re-im­pose on Iran are added to its scope, while the up­date of the EIB’S Ex­ter­nal Lend­ing Man­date would make Iran el­i­gi­ble for in­vest­ment ac­tiv­i­ties by the EIB,” the Euro­pean Com­mis­sion said on June 6, adding that this en­abling mea­sure does not how­ever com­mit the EIB to ac­tu­ally sup­port projects in Iran as it re­mains for the EIB’S gov­ern­ing bod­ies to de­cide to take up such fi­nanc­ing ac­tiv­i­ties – in line with rel­e­vant rules and pro­ce­dures.

Fol­low­ing the adop­tion on June 6, the Euro­pean Par­lia­ment and the Coun­cil will have a pe­riod of two months to ob­ject to these mea­sures be­fore they en­ter into force. If no ob­jec­tion is raised, the up­dated acts will be pub­lished and will en­ter into force at the lat­est at the be­gin­ning of Au­gust, by the time the first batch of reim­posed US sanc­tions will take effect, the Com­mis­sion said.

“The Euro­pean Union is fully com­mit­ted to the con­tin­ued, full, and ef­fec­tive im­ple­men­ta­tion of the JCPOA, so long as Iran also re­spects its obli­ga­tions. At the same time, the Euro­pean Union is also com­mit­ted to main­tain­ing co­op­er­a­tion with the United States, who re­mains a key part­ner and ally,” the Com­mis­sion said.

On May 8, Trump an­nounced the United States’ de­ci­sion to with­draw from the JCPOA and to re­in­state the US sanc­tions that were in force be­fore the JCPOA’S im­ple­men­ta­tion, sub­ject to cer­tain wind down pe­ri­ods.

Ac­cord­ing to the New York Times, in a let­ter sent on June 4 to US Trea­sury Sec­re­tary Steven Mnuchin and Sec­re­tary of State Mike Pom­peo, EU lead­ers cited “se­cu­rity in­ter­ests” in re­quest­ing that com­pa­nies in Europe be granted an ex­emp­tion from re­newed US sanc­tions against Iran.

“In their cur­rent state, US se­condary sanc­tions could pre­vent the Euro­pean Union from con­tin­u­ing mean­ing­ful sanc­tions re­lief to Iran,” said the let­ter, signed by the fi­nance and for­eign min­is­ters of Bri­tain, France, and Ger­many and EU for­eign-pol­icy chief Fed­er­ica Mogherini. With­out that sanc­tions re­lief, Iran has threat­ened to pull out of the deal. That “would fur­ther un­set­tle a re­gion where ad­di­tional con­flicts would be dis­as­trous,” the let­ter read, cited by the NYT. There are “no cred­i­ble alternatives at this time.”

The EU has crit­i­cized Trump’s de­ci­sion to pull out of the Iran deal and have tried to work with the US State Depart­ment to find a so­lu­tion for the Euro­pean com­pa­nies work­ing in Iran.

French oil ma­jor To­tal an­nounced in a press re­lease on May 16 that it would not be in a po­si­tion to con­tinue Iran’s South Pars 11 (SP11) gas de­vel­op­ment project un­less To­tal is granted a spe­cific project waiver by the US author­i­ties.

To­tal pointed to the fact that on July 4, 2017, to­gether with the other part­ner Petrochina, it ex­e­cuted a contract re­lated to the SP11 project in full com­pli­ance with United Na­tions res­o­lu­tions and US, EU and French leg­is­la­tion ap­pli­ca­ble at the time.

SP11 is a gas de­vel­op­ment project ded­i­cated to the sup­ply of do­mes­tic gas to the do­mes­tic Ira­nian mar­ket and for which To­tal has vol­un­tar­ily im­ple­mented a pol­icy that barred all con­trac­tors par­tic­i­pat­ing in the project from deal­ing or do­ing busi­ness with the pow­er­ful Ira­nian Revo­lu­tion Guards Corps, thereby con­tribut­ing to the in­ter­na­tional pol­icy to res­train the field of in­flu­ence of the IRGC.

Given the an­nounce­ment of new US sanc­tions, To­tal said it will not be in a po­si­tion to con­tinue the SP11 project and will have to un­wind all re­lated oper­a­tions be­fore Novem­ber 4 un­less To­tal is granted a spe­cific project waiver by the US author­i­ties with the sup­port of the French and Euro­pean author­i­ties.

This project waiver should in­clude pro­tec­tion of To­tal from any se­condary sanc­tions as per US leg­is­la­tion.

To­tal can­not af­ford to be ex­posed to any se­condary sanc­tions as US banks are in­volved in more than 90 per­cent of To­tal’s fi­nanc­ing oper­a­tions, US share­hold­ers rep­re­sent more than 30 per­cent of To­tal’s share­hold­ing and US as­sets rep­re­sent more than $10 bil­lion of cap­i­tal em­ployed.

To­tal, which con­firmed that its ac­tual spend­ing to date with re­spect to the SP11 contract is less than €40 mil­lion in Group share, urged the French and US author­i­ties to ex­am­ine the possibility of a project waiver.

*Kostis Geropou­los is the En­ergy & Rus­sian Af­fairs Edi­tor of New Europe news­pa­per.

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