‘Sanctions are set to cripple Iran’s fragile and damaged economy’

US sanctions are set to wreak ruin on the already battered Iranian economy and blame for the hardship is firmly on Tehran’s “mad” regime, a leading trade expert says.

This week, British renewable energy investor Quercus became the latest company to pull the plug on operations in Iran, halting the construction of a €500 million (Dh2 billion) solar power plant.

The plant would have been its first renewable energy investment outside Europe and the world’s sixth largest, with a 600 megawatt capacity.

The departure from trade with Iran has gathered pace not just in the US, where companies such as Boeing and Honeywell have pulled out since Washington started putting in place sanctions this month.

A survey by The National found that dozens of European corporate leaders are also withdrawing, including energy and car majors.

France has 600 companies registered as trading with Iran and there are hundreds more across Europe.

Tehran’s nuclear ambitions were given as the key cause for Iran’s economic situation, said Michael Thomas, chairman of Pathfinder Trade and Invest.

“The Iranian economy is going be disastrous for some time to come,” Mr Thomas, a former British trade envoy to Iran, told The National.

“The Iranian economy is absolutely up the creek and suffering very badly.

“The Iranian regime is quite mad and has already put Iran and Iran business commercial connections in a very weak position, and not just because of

these sanctions but also due to its foreign affairs.”

The recent sanctions by the Trump government were put in place on August 7, with another set aiming at Iran’s oil industry expected in November.

Despite British, French and German opposition to the US move, major European companies have begun to withdraw from deals with the Iranians.

French car maker PSA, parent company of Peugeot and Citroen, has severed links in its joint venture with Iran. That venture sold 445,000 vehicles last year. It signed production deals worth €700m when sanctions on Tehran were lifted in 2015.

Renault sold Iran 160,000 cars last year but has signalled its intention to withdraw.

Swiss company Stadler Rail has halted plans for a railway system in Tehran in what had been a $1.4bn agreement.

French company Total has tried to transfer is 50.1 per cent stake in the giant South Pars gasfield having signed a $4.8bn deal with Iran last July.

Mercedes-Benz parent company Daimler and leading engineering company Haldor Topsoe have also said they will reduce or end activities in Iran.

“We have suspended our already limited activities in Iran in accordance with the applicable sanctions,” a Daimler spokeswoman said.

Boeing has deferred indefinitely a 100-jet order from Iran and Airbus is due to make an announcement on its 95-plane Iranian order book soon.

Mr Thomas said this isolation would cause severe problems.

“You need international trade, that’s crucial,” he said. “Relying on Russia and the Far East has its limits. Iran really has missed the boat.”

“A big problem for the Iranians was that most of the major businesses were taken over by the state during the revolution. It’s all pretty inefficient because of the way its organised, so that will continue.”

Despite this, analysts still contend that the biggest damage will come from a weakened Iranian rial and oil industry.

“A collapsing Iranian rial has unleashed inflationary pressure across the economy, hiking the cost of imports and the cost of living, leading to protests across the country,” said a report by researcher Energy Aspects.

Amrita Sen, chief oil analyst at Energy Aspects, said: “The dollar sanctions that came in are extremely important. Most of the payments, not all, are done in dollars. Even the ones done in euros are not willing to transact with Iran.”

Ms Sen predicts Iranian exports to drop from 2.7 million barrels per day to 1.2 million after the November 4 sanctions.

“It will be catastrophic,” Mr Thomas said.