U.S. Sanctions on Iran: The View from Europe

By Ahmad Rafat

Shortly after the imposition of a new set of U.S. sanctions against Iran on August 7, U.S. President Donald Trump issued a strong warning to anyone trading with Tehran.

“The Iran sanctions have officially been cast. These are the most biting sanctions ever imposed, and in November they ratchet up to yet another level. Anyone doing business with Iran will NOT be doing business with the United States. I am asking for WORLD PEACE, nothing less!” Mr. Trump tweeted.

The warning places European countries and other nations around the world in the awkward position of having to take sides in the bitter political conflict between Tehran and Washington. The first wave of sanctions prohibits the sale of U.S. dollars to Iran.

U.S. courts slapped many banks and financial institutions with hefty fines for providing Iran with dollars before the 2015 Joint Comprehensive Plan of Action (JCPOA), better known as the Iran nuclear deal. France’s BNP was fined $8.9 billion, Britain’s HSBC $1.92 billion, Germany’s Commerzbank $1.4 billion, and China’s ZTE $1.3 billion. More than 30 other banks and financial institutions, meanwhile, had to pay hundreds of millions of dollars in fines for violating the sanctions against Iran.

In previous years, Iran was able to buy dollars from neighboring Afghanistan, Turkey, Iraq and the United Arab Emirates (UAE). It will no longer be able to bring back suitcases stuffed with dollars from these countries — with the possible exception of Turkey, which has yet to decide how to react to the new set of sanctions.

[aesop_image img=”https://kayhanlife.com/wp-content/uploads/2018/07/2012-10-04T120000Z_669106588_GM1E8A41LG901_RTRMADP_3_IRAN-CURRENCY-AFGHANISTAN.jpg” panorama=”off” align=”center” lightbox=”on” caption=”Afghan money changers gather to deal with foreign currency at a money change market in Herat October 4, 2012. Afghanistan has imposed a cap on U.S. dollar flows across the border with Iran amid clashes there between Iranian police and protesters prompted by a collapse in the rial currency, Afghan police said on Thursday. REUTERS/Mohammad Shoib” captionposition=”left” revealfx=”inplaceslow” overlay_revealfx=”off”]

During a press conference on August 8, Iraqi Prime Minister Haider al-Abadi said: “As a matter of principle, we are against sanctions in the region. Blockades and sanctions destroy societies and weaken regimes.” However, he added: “Iraq will abide by them.”

Afghanistan, which depends heavily on the U.S. for financial aid, will most likely follow the same policy as Iraq. The UAE has already been abiding by the U.S. sanctions.

The sanctions also prohibit the sale of gold, precious metals, aluminium, steel, coal, and graphite to Iran. They target the purchase of technology, planes, cars, and motorcycles. All French companies except Renault are in the process of ending their businesses and trading ties with Iran.

The latest European companies to have pulled out of Iran include Scania AB, a Swedish manufacturer of commercial vehicles, and Daimler-Benz AG, a German manufacturer of motor vehicles and internal combustion engines. The U.S. has also banned the import of Iranian pistachio, saffron, and rugs.

Iran will come under greater economic pressure when the second phase of the sanctions goes into effect on November 4. These new measures target the lifeline of Iran’s economy — including the shipping industry, banking trades, and the energy sector. The U.S. is trying to halt Iran’s oil export completely. Experts, however, believe that Iran will be able to smuggle out around one million barrels of oil a day, using land and sea routes.

An Italian manufacturer who has been selling industrial machinery to Iran for many years spoke to Kayhan London on condition of anonymity. This businessperson said: “The new wave of sanctions will deliver a significant blow to many European countries, particularly Italy, which has relied heavily on the Iranian market after the JCPOA. It is quite possible to file a complaint against the U.S. with the international courts, but no company wants to start a legal battle with the U.S. European companies will lose both in the courts and the U.S. market.”

“Efforts by the Europeans to counteract the U.S. sanctions are small face-saving measures. Ultimately, they will not achieve anything,” the manufacturer explained. “The EU doesn’t have a centralized decision-making body that can take any meaningful steps to bypass the sanctions. The EU is made up of 27 countries, each with its own particular set of interests that at times clashes with the other members’ agendas. In the U.S., however, the president and the Treasury Department make and implement the decisions. Although many European countries are committed to the JCPOA, the Czech Republic, Poland, Hungry, Slovakia and Spain would like to avoid a conflict with the U.S. at any cost.”

The Italian businessman noted: “The EU has asked the European Central Bank to allocate some funds for paying off any possible U.S. fines. The banks’ entire holdings are at between $14 and $15 billion. If previous payments are any indication, this figure will not be enough to pay off any possible heavy fines. The only other option is for the U.S. Treasury to exempt European companies from sanctions. The U.S. has so far rejected the requests from Germany, Italy, and France in this regard. It doesn’t appear that Washington is prepared to show any flexibility on the issue.”

[aesop_image img=”https://kayhanlife.com/wp-content/uploads/2018/07/Conti-and-Trump-2018-Press-Conference.jpg” panorama=”off” align=”center” lightbox=”on” caption=”U.S. President Donald Trump and Italy’s Prime Minister Giuseppe Conte hold a joint news conference in the East Room of the White House in Washington, U.S., July 30, 2018. REUTERS/Brian Snyder” captionposition=”left” revealfx=”off” overlay_revealfx=”off”]

The EU can adopt a similar approach to the one it did in 1996 when the European Council of Ministers approved the Common Position. The objective with the Common Position was to encourage a process of transition to a pluralist democracy and respect for human rights and fundamental freedoms in Cuba.

The Italian industrialist said: “The Common Position was an utter failure. European businesses are independent, and governments cannot force them to abide by their political agendas. The only way to continue trading with Iran is to bypass banks and conduct all transactions in cash. However, this method works for selling goods but not industrial machinery and contracts worth millions of dollars.”

The European Parliament voted to allow the European Investment Bank to cooperate with Iran. However, the head of the bank, Werner Hoyer, told reporters that the bank would risk its global operations by investing in Iran. Mr. Hoyer reminded EU parliamentarians that “U.S. investors owned large shares in the bank, and doing business with Iran could seriously hurt the bank.”

[Translated from Persian by Fardine Hamidi]