EU Countermeasures Against US Sanctions Questioned

EghtesadOnline: With the reimposition of US sanctions on Iran expected to come into effect in autumn, plans by the European Union to protect companies still trading with Tehran from being penalized by Washington is proving to be a struggle.

News ID: ۷۴۵۷۲۷

28 July 2018

Final touches are being made to the EU plan to mitigate the punitive measures, as the US administration prepares to impose a new wave of sanctions next month and in November, reads an article published by The Middle East Monitor. Below is the full text:

The first batch is expected to target trading in cars, gold and other metals; the second Iran’s oil exports and transactions with the central bank.

The main weapon devised by the EU is said to be an updated version of what is known as a “Blocking Statute” originally drawn up in the 1990s to counter US sanctions on Iran, Libya and Cuba. The EU announced that it plans to launch the formal process to activate this law to ensure the survival of the nuclear deal, according to Financial Tribune.

The Blocking Statute prohibits European companies from complying with the US measures and allows them to recover damages arising from the sanctions. If enforced, the statute will make compliance with the US sanctions illegal. Furthermore, it will make it possible to nullify the judgments of US courts on European companies.

Lawyers and diplomats, according to Financial Times, are now having doubts over the plan, which they say has not been tested properly.

A key issue is the fact that the European countries are unwilling to enter into a trade war with the Americans, which position may be tested to the limit once sanctions come into effect. What companies decide to do will depend on economic forces, say experts, and not which political side they belong to.

The countermeasures adopted by the EU may have limited impact in protecting and persuading multinational companies to continue trading with Iran with the threat of fines and criminal prosecution in the US hanging over their head.

The biggest trading companies, the FT pointed out, have operations in the US that are far more important to their businesses than their dealings with Iran. Not only does this make them ultra-cautious but it also means they will prioritize adherence with the US sanctions over anything the EU might offer.

One business executive cited by the FT said: “Previously when major non-US companies have had to choose between complying with the EU blocking statute or complying with US sanctions they have chosen the US sanctions almost every single time.”

Companies have tended to opt for the “lesser of the two evils.”

As there is no real appetite in the EU to escalate this rift with the US–French President Emmanuel Macron, for example, said he had no wish to target US companies, nor force French companies to stay in Iran if they wanted to pull out–the main arsenal in the hands of the EU seems to have been blunted before the battle has begun.

US Senators Warn Europe

A group of Republican senators on Thursday warned European nations not to try to flout US sanctions on Iran that will soon be reimposed after US President Donald Trump withdrew from a landmark nuclear accord, AP reported.

The 10 senators, all of whom opposed the 2015 agreement, said in a letter to the ambassadors of Britain, France and Germany that they would be “particularly troubled” by any efforts to evade or undermine the sanctions. They said attempts to do so could be met by congressional action.

A first set of US sanctions lifted by the Obama administration under the terms of the nuclear deal is to be restored on Aug. 6. A second set will be reimposed on Nov. 4.

The senators, including outspoken Iran deal critics Ted Cruz of Texas, Marco Rubio of Florida and Tom Cotton of Arkansas, noted that the sanctions are matters of US law and had been eased only because the previous administration had approved the deal, which Trump pulled out of in May.

“We write to urge you to comply with all American sanctions but also to emphasize we would find it particularly troubling if you sought to evade or undermine American statutes,” the senators wrote. “These laws were passed by Congress, signed by President Obama and will be enforced by President Trump.”

“Any attempt to evade or subvert them could well prompt congressional action, in coordination with other elements of the US government, to ensure their integrity,” they said.

Britain, France and Germany-along with China, Russia, the European Union and Iran itself-were the other parties to the nuclear deal that was one of former president Barack Obama’s signature foreign policy achievements.

Trump campaigned against the agreement, which he has called the worst deal ever negotiated by the United States, and followed through on that pledge to the anger of the other parties who remain in it.

Some European officials, who believe the deal is vital for the security of the continent, have suggested trying to work around the reimposed US sanctions to preserve the deal. Those sanctions would penalize foreign governments or firms, including financial institutions, that do business with Iran.