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Large EU firms are pulling out of Iran

Major European firms have started to pull out of Iran to avoid being hit by harsh US sanctions, despite tough talk by EU leaders.

Published: May 18, 2018, 8:48 am

    Oil prices have spiked, trade tensions are simmering and geopolitical risks have increased in the wake of Donald Trump’s decision to withdraw from the nuclear deal

    Danish international shipping conglomerate AP Moller-Maersk, warned on Thursday that it was feeling the consequences. Maersk’s chief executive Soren Skou told Reuters that the rise in oil prices combined with tension over Iran in the wake of the US’s withdrawal from the nuclear deal were not good for the container shipping business.

    Maersk will soon shut down its business in Iran, the news agency reported, becoming the latest foreign investor to pull out of the country. Maersk, the world’s largest oil shipping container firm, said on Thursday it would honour customer agreements entered into before 8 May, but by 4 November it will comply with reimposed US sanctions as required, The Financial Times reported.

    On Wednesday Total, the French group became the largest foreign investor in Iran’s energy sector to withdraw unless it could receive protection from US penalties.

    An attempt to shield EU companies doing business with Iran, by the European commission president, Jean-Claude Juncker, is similar to the measures used to protect businesses working in Cuba from a US trade embargo. But larger firms will not benefit from the EU plan.

    “We will begin the ‘blocking statute’ process, which aims to neutralise the extraterritorial effects of US sanctions in the EU. We must do it and we will do it tomorrow [Friday] morning at 10.30,” Juncker said.

    He added however that the measures were aimed at small and medium-sized businesses. “The effects of the US sanctions will be felt. It is the duty of the EU therefore to protect European business and that applies particularly to smaller and medium-size businesses.”

    But the EU may not be able to provide legal and financial guarantees to protect European firms that keep trading with Iran. German chancellor, Angela Merkel, admitted as much. So despite the tough talk, the EU cannot afford to ignore the US and the chances of the Iran nuclear deal surviving the impact of US sanctions are slim.

    “We can see whether we can give small and medium-sized companies certain relief. That is being examined … As for compensating all businesses in a comprehensive way for such measures by the United States of America, I think we cannot and must not create illusions,” Merkel said.

    The European council president, Donald Tusk told a meeting of EU leaders: “The problem is if your closest friend is unpredictable. It is not a joke now. This is the essence of our problem now with our friends on the other side of the Atlantic. I can agree with President Trump when he said unpredictability can be a very useful tool in politics. But only against enemies and opponents. Unpredictability is the last thing we need with friends and family.”

    The French president, Emmanuel Macron, welcomed Total’s decision to pull out of its 50.1 percent stake in the South Pars 11 oil field in Iran: “We’re not going to force French businesses to stay in Iran. The president of the French republic is not the CEO of Total.”

    Total announced on Wednesday that Chinese investors are likely to take over its share of the investment.

    Trump called the Iran deal “horrible” because of the Iranian commitment to end its nuclear programme in return for greater trade with the west. EU ambassadors have warned Washington of the danger of a nuclear arms race as well as economic chaos.

    Günther Oettinger, the EU budget commissioner, urged the EU to remain united: “One thing is very clear to me: Trump despises weaklings.”

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