May 26, 2018
The world was remarkably quiet after President Trump withdrew from the nuclear deal with Iran, with little overt opposition to his decision.
Business analysts predicted that most firms doing business with Iran would wrap up their dealings and withdraw from Iran over the next six months in order to protect their business in the United States. No businessman or major political figure was heard calling on the world to stick it to Trump.
It was a stunningly limp reaction to a decision opposed by almost everyone outside the United States who commented on the prospect in recent months.
The governments of Israel, Saudi Arabia, the UAE, Bahrain and Poland were the only ones to speak out in support of Trump. Most governments were silent. Those who criticized the decision were largely modest in their choice of words, saying they were “concerned” or “disappointed.”
Prime Minister Justin Trudeau said he was unhappy with the decision, but added that countries had a right to withdraw from agreements if they so chose.
Oman broke with its Arab neighbors and lauded the five other parties for sticking with the deal.
The strongest statement critiquing Trump came from Jean-Claude Juncker, the president of the EU Commission. He said Trump’s action shows the United States “no longer wants to cooperate with other parts of the world…. At this point, we have to replace the United States, which as an international actor has lost its vigor and, because of it, in the long term, influence.” That was damning language. But it said nothing about defending the nuclear deal.
The European Union actually sat on its duff. It did not pledge to protect its firms from American retaliation if they traded with Iran, as one would have expected. Eventually, it will have to decide what to do if European firms are sanctioned. But it hasn’t figured out what to do now, despite having had four months advance notice of the likely decision by Trump.
Siemens, a German firm that has done much business in Iran, is “assessing the implications” of Trump’s decision, said Chief Financial Officer Ralf Thomas. “One of the strongest industrialized countries in the world has made a political decision. As an industrial company, we have to recognize that.” Thomas said.” He added that current projects in Iran will be completed “as far as legally possible”—not exactly a ringing statement.
Dieter Kempf, the head of BDI, the main German industrial association, said the nuclear deal had sparked great hopes for an opening of the Iran market. “These hopes have now clearly been dimmed,” he said, without suggesting any interest in fighting Trump.
The British government issued a notice to businesses that said, “How UK companies act in response to US sanctions is a commercial and legal decision for that company”—again, hardly a ringing statement of support for firms who wish to keep doing business in Iran.
Some banks that a few months ago drew news coverage for entering Iran said they had now withdrawn.
In Denmark, Danske Bank’s spokesman Kenni Leth said, “During recent months, the operational and reputational risks associated with doing business in Iran have increased. Earlier this year, we decided to phase out and exit all activities to and from Iran and suspend our existing relations with Iran.”
Austria’s Oberbank announced last year a major program for supporting Austrian investors in Iran. It has now decided not to provide any financing to Iran “due to the constantly changing political framework.”
France’ s government export finance program was due to start financing Iran programs in May or June. But Reuters said “several” French officials had told it the plan has now been “put on hold.”
One French diplomat told Reuters that French firms “will have to choose between their economic interests and their potential US interests. Generally, that decision is quickly made in favor of the US.”
These reactions were all very limp—and also quite different than in the past. Going back decades, Europe has always balked at any effort by the United States to impose its economic policies on Europe by making US laws applicable to European firms. But this time, there has been no uproar whatsoever. Europe appears to be rolling over.
Back in the 20th Century, the EU approved what it called a “blocking statute” to stop such US actions. It bans EU companies from complying with US sanctions and does not recognize any US court rulings that enforce US penalties. But that law has never been used and is generally viewed in Europe more as a political weapon to wave at the United States than as a serious and enforceable policy.
If the United States fines a firm for doing business with Iran, it can seize that firm’s funds in the United States. The only way a firm can avoid that is to withdraw completely from the United States. A small firm may find it can do more business in Iran than in the United States. But for a large international firm, the US market far outweighs that of Iran.
A senior European diplomat told Reuters, “Let’s not fool ourselves that there are dozens of things we can do. We don’t have much to threaten the Americans.”
The only substantive idea that emerged over the past month would have European oil importers make payments for Iranian oil to their own central banks, which would then remit the funds to Iran’s Central Bank. That could maintain European oil imports, which amount to about one-fourth of Iran’s total oil exports.
Bloomberg News surveyed oil traders and refiners and reported that many told it they would curb purchases from Iran unless the EU was able to secure waivers from the Trump Administration.
In the Far East, Japan’s Inpex Corp., that country’s largest oil explorer, said it might drop its plans to bid for a role in developing Azadegan, Iran’s largest oilfield.
South Korea’s Energy Ministry said it would seek an exemption from the Trump clampdown on Iranian oil sales. It got such an exemption from the Obama Administration. But this is no longer the Obama Administration.
