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Should they stay or should they go: How will key businesses react to sanctions? Open in fullscreen

The New Arab

Should they stay or should they go: How will key businesses react to sanctions?

Shipping giant Maersk are the latest of several high-profile casualties of sanctions on Iran [Getty]

Date of publication: 17 May, 2018

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Despite EU leaders firmly determined to preserve the fragile Iran deal, several high profile companies are teetering on packing up their business in Iran.
As EU leaders scramble to salvage the 2015 Iran nuclear deal, an announcement was made by the body to block the effect of sanctions reimposed by the US.

Many European firms are resolute to carry on their lucrative dealings in Iran in the face of legal threats from President Donald Trump's hawkish administration.

It has not stopped some European firms from making public their fears about doing business in Iran under a potentially hefty US embargo, which could see them face financial penalties from Washington for continuing trade with Tehran.

As oil prices soar under the uncertainty of Iran's economic future, many multi-billion dollar contracts that were signed during a recent period of optimistim during EU-US-Iran rapprochement, now hang in the balance.

Read more: Riyal in retrograde: What will the sanctions mean for Iranians and their economy?

European firms, especially those from France and Germany, rushed to invest in Iran following the 2015 accord, under which Tehran agreed to freeze its nuclear programme in return for sanctions relief.

German exports to Iran totalled nearly 3 billion euros in 2017. French exports soared from 562 million euros in 2015 to 1.5 billion in 2017. Oil giant Total pledged to invest some $5 billion in the South Pars gasfield.


Out


Maersk


Danish shipping giant Maersk is the latest to announce it will not operate in Iran under US sanctions.

Maersk Tankers would honour customer agreements entered into before 8 May, but then wind them down by 4 November, "as required by the reimposed US sanctions", the company told AFP.

The group said it "has been transporting cargoes for customers in-and-out of Iran on a limited basis", without providing precise figures for its activities.

Maersk Tankers operates more than 160 vessels and employs 3,100 people worldwide with a turnover of $836 million in 2016.

Boeing & Airbus

Aside from oil, the biggest contracts signed between Iran and new trading partners were those for air travel. A spate of aviation disasters in Iran reflect the deteriorating quality of the country's airliners, where decades of sanctions have prevented them from being upgraded or replaced.

Read more: New US sanctions will make Iranians sicker

Despite France insisting it will "do everything" to keep its companies in Iran, aircraft manufacturers are likely to take a hit as the US has revoked licenses for companies to sell passenger jets to Iran.

American aviation giant Boeing have announced they will follow US policy on Iran, and while the verdict is not out yet on its French equivalent Airbus, it is expected the pair will lose out on a $39 billion deal with Iranian airlines they struck in 2016.

Russia have been quick to offer alternative aircraft contracts, with aircraft maker Sukhoi reportedly already working on a model of jet to sell to the Iranians.


Total


French oil giant Total warned on Wednesday that it would pull out of a huge gas project in Iran, which started in July 2017, unless it can obtain a waiver from the US authorities with the support of France and the European Union.

Total started the $4.8-billion South Pars 11 project in July 2017, two years after Western powers signed the nuclear deal with Tehran which prompted the return of many businesses to Iran.

The French group said Wednesday it has $10 billion of capital employed in its US assets, and American banks are involved in 90 percent of its financing operations, making Total highly vulnerable if targeted by any US actions.

By contrast, Total said it had spent less than 40 million euros ($47 million) on the Iranian project, which it runs with its partner Petrochina, and which is dedicated to the supply of gas inside Iran.


In


CNPC


By contrast, Chinese state-owned oil giant CNPC are set to replace Total on the gas field project if they pull out, Iran's oil minister said on Wednesday.

"Total has said that if it doesn't get an exemption from the United States to continue its work, it will begin to pull out of the deal," Bijan Namdar Zanganeh was quoted as saying by his ministry's Shana news service.

"If that happens, the Chinese firm CNPC will replace Total."

Zanganeh added that were CNPC, which was part of the Total deal, unable to carry out the work in South Pars due to US sanctions it would fall to Iran's Petropars.


Hanging in the balance


Saga Energy

Norwegian solar panel manufacturer Saga Energy announced last year its intention to invest $2.9 billion in Iran over the next five years, despite Trump already making threats about scrapping it. It has left some some hopeful that Saga will resist caving to the US if Washington pulled out of the nuclear deal.

Read more: Trump doesn't understand the art of the Iran deal

Trump's withdrawal from the deal, however, was more severe than expected, including his threats to European companies who continued to trade in Iran. Saga are yet to announce whether they will continue their investments.

Volkswagen & PSA

Volkswagen announced that it resumed selling cars in Iran for the first time in 2017. The German company continues to face questions over its "Dieselgate" scandal in the US, long a key market. They have not yet announced which avenue they will take.

French automaker PSA - who make Peugeot and Citroen cars - reached an agreement last year to sell vehicles in Iran and reported sales increases in the country since resuming trade.

PSA has indicated interest in returning to the US market, a goal that would force it to rethink its Iran plans.

Agencies contributed to this report.

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