US President Donald Trump announced last month the decision to unilaterally withdraw from the Joint Comprehensive Plan of Action, the formal name of the nuclear deal, and reimpose sanctions against the Islamic Republic.
According to economists and leading figures in the government, the key to benefit in the current circumstances lies in a new partnership between Iranian and European small- and medium-sized enterprises, including those of France.
Addressing representatives of Iran Chamber of Commerce, Industries, Mines and Agriculture on Sunday, Iran's Foreign Minister Mohammad Javad Zarif said as part of Iran's negotiations with European partners, they will introduce 5,000 SMEs for participating in joint ventures with domestic companies, Financial Tribune reported.
He saw this as a good omen for Iran's "real" private sector to seize the opportunity to leave their bigger semi-state rivals behind.
France, Germany and the United Kingdom have repeatedly stressed that they would remain committed to JCPOA and protect their economic interests in Iran.
In a letter sent on June 4 to US Treasury Secretary Steven Mnuchin and Secretary of State Mike Pompeo, EU leaders cited “security interests” in requesting that companies in Europe be granted an exemption from renewed US sanctions against Iran.
“In their current state, US secondary sanctions could prevent the European Union from continuing meaningful sanctions relief to Iran,” said the letter, signed by the finance and foreign ministers of Britain, France and Germany, as well as EU foreign policy chief, Federica Mogherini.
> In the Vanguard
France is a leading member state of the European Union and eurozone. It is also a member of the Group of 7, North Atlantic Treaty Organization, Organization for Economic Cooperation and Development, World Trade Organization and La Francophonie.
A member of the Group of 7 leading industrialized countries, as of 2014, it is the world's ninth largest and EU’s second largest economy by purchasing power parity. With 31 French firms among the 500 biggest international companies in 2015, France ranks fourth in the Fortune Global 500, ahead of Germany and the UK.
The European country accounts for a significant share of Iran’s economic transactions following the conclusion of the nuclear deal. Yet the US withdrawal on May 8 from the deal and his decision to reinstate economic sanctions on Iran in November has reignited concerns for its European partners.
France has arguably been the most proactive country in the European Union to resume business ties with Iran. Soon after the nuclear deal, Iran’s President Hassan Rouhani went to Paris. Later, two foreign ministers, Laurent Fabius and Jean-Marc Ayrault, as well as ministers of economy, transport, foreign trade, agriculture and higher education, traveled to Tehran.
The biggest contract was signed by the oil giant Total: a more than 50% stake in an investment of about $4.8 billion for the development of an offshore gas field in the Persian Gulf.
However, on May 16, Total put out a statement saying that it could not continue with the Iran's South Pars Phase 11 project, in light of the US president's decision.
“Total has always been clear that it cannot afford to be exposed to any secondary sanction, which might include the loss of financing in dollars by US banks for its worldwide operations (US banks are involved in more than 90% of Total’s financing operations), the loss of its US shareholders (US shareholders represent more than 30% of Total’s shareholding) or the inability to continue its US operations (US assets represent more than $10 billion of capital employed),” read the statement.
State-owned China National Petroleum Corp., which already owns 30% of the South Pars project, has been primed to take over Total’s 50.1% stake.
“If the US administration does not agree with Total staying in Iran, China will replace this company,” Iran's Oil Minister Bijan Namdar Zanganeh said in a statement last month.
Europe’s second-biggest carmaker, PSA said in early June that it would pull out of two joint ventures to sell its cars in Iran to avoid the risk of US sanctions.
“The group has begun to suspend its joint venture activities to comply with US law by August 6, 2018,” the maker of Peugeot and Citroen cars said in a statement in early June.
It had signed deals with two Iranian automakers, Iran Khodro and SAIPA, in 2016 after sanctions were lifted. In 2017, PSA sold nearly 444,600 vehicles in Iran, making the country one of its biggest markets outside France.
“With the support of the French government, Group PSA is engaging with the US authorities to consider a waiver,” a PSA statement said.
Carlos Ghosn, the CEO of French carmaker Renault, however, announced on June 15 that the carmaker will maintain its presence in Iran while taking measures to avoid the risk of penalties for breaching renewed US sanctions.
“We will not abandon it, even if we have to downsize very strongly,” he said.
Renault signed a €660-million trilateral production deal with Industrial Development and Renovation Organization of Iran and the local private company Negin Khodro last August.
Earlier in January, Renault released its 2017 sales in detail, reporting that it sold 162,079 vehicles in Iran during the year, which accounts for 79.7% of vehicles sold by the major carmaker in the Middle East.
French company Alstom entered a joint venture with Iran to manufacture 1,000 subway wagons in three years after it signed a trilateral “shareholders agreement” with the Industrial Development and Renovation Organization of Iran and Iranian Rail Industries Development Company in Tehran in July 2017 to manufacture the wagons at the IRICO facilities.
An IDRO source told Financial Tribune that about €1.3 billion would be invested in the joint venture whose main shareholder is Alstom with 60%, while each one of the Iranian companies would own a 20% stake.
The fate of this JV remains unclear now.
Other contracts were also signed, including the sale of more than 100 aircraft with the European multinational corporation Airbus, with France being one of its biggest shareholders. Iran has only been delivered 3 of the planes so far.
France-Iran trade stood at €3.69 billion in 2017, registering an increase of 79.64% compared with the year before.
Iran exported €2.28 billion worth of commodities to the European country and imports reached €1.41 billion last year, according to Eurostat data.
This made France Iran’s second biggest trade partner from among the 28 member states of the European Union last year.