May 26, 2018
Since President Trump took the United States out of the Iran nuclear agreement, foreign business has been abandoning Iran in surprising numbers, without even waiting to see what the EU will do to counter Trump.
The rush to leave Iran began only hours after Trump’s May 8 announcement.
The most important announcement came from Total of France, the only Western oil company to sign a deal with Iran, in this case to develop Phase 11 of the South Pars gasfield with an investment of almost $5 billion.
Total said it would leave Iran by November 4 (when the oil sanctions resume) unless it receives an exemption from Washington. Washington said there will be no exemptions.
Total has not formally announced its departure, but Iran has already indicated it will turn over the South Pars project to the China National Petroleum Company (CNPC), which already holds a minority share of one-fifth in the project.
Total issued a statement saying, “Total has always been clear that it cannot afford to be exposed to any secondary sanctions, which might include the loss of financing in dollars by US banks for its worldwide operations.” Total said American banks are involved in more than 90 percent of its financing and the firm also has major operations in the United States and many American shareholders.
The European Union has complained bitterly about Trump’s action, but hasn’t really done much beyond complaining. Officials of several countries have said there isn’t much they can do. Some countries are looking at giving help to small and medium-sized enterprises that lose business by leaving Iran—but that is no help to Iran.
The one serious effort by the EU would set up a system for paying Iran for oil imports in euros that would bypass the international banking system, which is dominated by US banks. European oil importers would pay the EU for the oil and the EU would then transfer the money to Iran.
If this materializes, it would be a huge benefit for Iran since about one-quarter of Iran’s oil exports go to Europe. But it wouldn’t do anything to stop the flight of foreign businesses from investing in and selling to Iran.
French President Emmanuel Macron made Europe’s position bluntly clear to all: “We’re not going to be the allies of Iran against the United States of America.”
The EU sent its energy commissioner, Miguel Arias Canete, to Iran in mid-May to try to develop with Iran the framework for countering sanctions on oil purchases by Europe. After his departure, Foreign Minister Mohammad-Javad Zarif was downright dismissive of the EU. He said the EU’s efforts to help Iran were not sufficient.
“The cascade of decisions by EU companies to end their activities in Iran makes things much more complicated,” he said May 20. “With the exit of the United States from the nuclear deal, the expectations of the Iranian public toward the European Union have increased … and the EU’s political support for the nuclear agreement is not sufficient….
“The European Union must take concrete supplementary steps to increase its investments in Iran. The commitments of the EU to apply the nuclear deal are not compatible with the announcement of probable withdrawal by major European companies,” Zarif said.
Here are some of the firms that have talked about abandoning Iran.
• Maersk Tankers of Denmark, a subdivision of A.P. Moller Maersk, said it will end all its services to Iran. Bloomberg News said tanker firms would be more likely to stop carrying Iranian cargoes now than when sanctions went on in 2012. Bloomberg said insurance was the one hangup then. Now, it said, the United States has become an oil exporter and tanker firms also fear losing the US business.
• Swiss-based MSC, the world’s second biggest container shipping firm after A.P. Moller-Maersk, announced it has stopped taking bookings for shipments Iran except for foodstuffs.
• Joe Kaeser, CEO of Germany’s Siemens, which is in the process of providing three gas turbines to Iran, said Siemens could not continue to do business with Iran. Siemens sales in Iran are a “very small portion” of its global business, while about one-fifth of all the firm’s sales last year were to the United States, where Siemens employs about 50,000 workers.
• The French gas and power group Engie said it currently has engineering teams working in Iran for clients. “We have 180 days to end these contracts, which takes us to November. It will be done,” CEO Isabelle Kocher said.
• Poland’s largest gas firm, PGNiG, said it is suspending its gas project in Iran. “There is not much we can do about the contract in Iran. Any moment the sanctions will be put in place and nobody wants to take a risk,” Deputy CEO Maciej Wozniak told Reuters.
• Italian steel firm Danieli, one of the first European firms to go back to Iran after sanctions were lifted and a long and enthusiastic investor in Iran, said all that has changed. “With the withdrawal of the US from the treaty, the banks are no longer ready to fund Iranian projects for fear of secondary sanctions,” CEO Alessandro Travelling said May 17. Danieli has an agreement with Iran outlining $5.7 billion in projects, but the money has to come from banks.
• Europe’s largest insurer, Allianz SE, said it was awaiting guidance from Germany and the EU but was “developing wind-down plans” in the meanwhile.
• Germany’s DZ Bank, the second largest lender in that country, said it will end all payment transactions to Iran July 1.
• Matthieu Etourneau, the head of the French Business Center, the country’s main business lobby, said, “We can fear a mass withdrawal of European firms.” He said smaller French banks, the only ones operating in Iran, have been telling customers they expect to stop providing services August 6 when banking sanctions will resume.
• Ian Taylor, CEO of Vitol Group, the world’s largest oil trading firm, said May 25, “I personally think none of us [oil traders] will be able to get around it [the Trump sanctions].”
The Islamic Republic heaped up massive media coverage within Iran for its signing of an agreement May 16 with Britain’s Pergas Resources to work on a Khuzestan oilfield, Karanj, portraying it as a counter to Trump’s new sanctions policy. However, all Pergas and the National Iranian Oil Co. (NIOC) signed that day was a “heads of agreement,” a document that makes no commitments and is little more than an agenda of issues that must be discussed and resolved before any further action.