Europe to the Fore in Cementing Iran Deal as U.S. Issues Threats

EghtesadOnline: Before the platters of roast lamb and fragrant rice were served, visiting executives squeezed into the front room of the Swedish ambassador’s home in Tehran to applaud ambitious plans to restore Iran as a top trade partner.

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15 February 2017

The men and women representing companies including AstraZeneca Plc and truckmaker Scania AB had flown in with Prime Minister Stefan Lofven, who was making the first official visit to Iran by a Swedish premier since a mediation effort during the 1980s war with Iraq. The 75-member delegation was intent on doing business, but the politics was inescapable: as the U.S. under Donald Trump steps away from Iran, Europe’s moving forward, unwilling to throw away years of tortuous diplomacy, Bloomberg reported.

“Before sanctions, Iran was the biggest export market for Sweden in the Middle East,” Trade Minister Ann Linde said at the Feb. 11 event attended by Iranian businessmen and ministers. “We hope it will be again.”

European leaders are emerging as strong backers of the 2015 six-nation nuclear deal with Iran, derided by Trump as one of history’s dumbest. They want their companies to prosper in a largely untapped market of 80 million people, but there’s a deeper motive -- to bolster the moderate politicians led by President Hassan Rouhani seen as the best bet for an Iran that’s freer at home and more more willing to cooperate in defusing Mideast flashpoints. Russia, another signatory to the agreement, is a key ally of Iran.

May Election

“The Europeans want an administration in Iran that will stick to the deal and pursue a moderate engagement with Europe that has begun already,” Ellie Geranmayeh, policy fellow for the Middle East and North Africa program at the European Council for Foreign Relations, said by phone. For a start, Rouhani, who broke Iran out of its isolation in 2013, faces a likely re-election fight in May with hardline opponents who are suspicious of closer ties with the West.

The Swedish delegation was sandwiched between a high-level French political and commercial visit, led by Foreign Minister Jean-Marc Ayrault, and a Feb. 12 automobiles conference attended by senior executives from Peugeot, Citroen, Renault and Hyundai.

“I’ve been to Iran 25 times in less than two years,” Jean-Christophe Quemard, Peugeot’s executive vice-president for the Middle East and Africa, told reporters when asked if his latest trip was in any way motivated by Trump’s policies. “What does this mean? Times have changed. You need to get used to seeing our faces in Tehran.”

Sanctions imposed on Iran over its disputed nuclear program slashed its trade with Sweden by 90 percent to about 1 billion krona ($112 million) in 2012. Among the documents signed during Lofven’s visit was a 110-million euro pact between Scania and Iranian heavy-vehicle maker Oghab Afshan to produce 1,350 buses. Hamid Akbari, a member Oghab Afshan’s board, said the company was in talks with three Swedish lenders for financing.

Bank Woes

For Europeans turning up in Iran, pledging to boost business is the easy part. Delivering is harder, especially as sanctions not lifted under the 2015 accord -- primarily U.S. curbs punishing Tehran for its missile program and links to groups such as Hezbollah that America designates as terrorist -- continue to scare away major banks.

Two of Iran’s biggest post-sanctions deals-- contracts for Airbus and Boeing aircraftworth a combined $26.6 billion -- have been complicated by the remaining U.S. restrictions and difficulties arranging finance. The Trump administration, which accuses Iran of being a destabilizing force in the region that should be confronted rather than rewarded, isn’t making life easier for investors.

Finding ways to “finance business in Iran” is a major challenge, Linde said. Sweden’s export credit agency, SEK, was doing more to guarantee short-term loans but longer financing deals remained problematic, she said. Iran’s own banking system is only slowly recovering from years cut off from international finance.

France’s Treasury is planning to issue direct loans to businesses that want to work in Iran, according to a French government official, who declined to be named because of the sensitivity of speaking to foreign media in Iran. French business lobby group Medef International has set up an office in Iran.

Missile Launch

Germany’s KfW development bank agreed a 1.2 billion euro loan to Iran for a rail road in November, while Italy’s export credit agency SACE SpA and the CDP Group last year extended about 9 billion euros in loans and guarantees.

European leaders were quick to point out that they considered last month’s launch of a ballistic missile by Iran -- seized on by the Trump White House which put Tehran “on notice” -- didn’t contravene its commitments under the nuclear accord. But they did express concern and called on Tehran to be more constructive in regional conflicts.

Francois Senemaud, France’s ambassador in Tehran, urged all stakeholders to help make a success of the deal at the car-maker conference. “We are ready to take our share of this endeavor,” he said.