European businesses are fleeing Iran
The speech by US Secretary of State Mike Pompeo on Monday put an end to bargaining. Washington has now officially declared war on Iran with the weapon of economic sanctions, which do not just put pressure on the regime — they constitute a threat to its existence.
Dozens of European companies have rejected Iranian inducements to stay in the country out of fear of Donald Trump’s administration, which has threatened that anyone who does not stop dealing with Iran in the next 180 days will be banned from dealing with the US market.
Total, the French energy company, has halted its Iranian gas project. The head of Italian company Eni has informed the firm’s management that it has closed its offices in Tehran and stopped exploration operations for oil and gas. Airbus had signed an agreement for the sale of 100 planes to Iran, but only three had been delivered under the historic deal when the company announced its cancellation. Other major companies, such as German giant Siemens, Italy’s Danieli steel company and Maersk shipping company, have also scaled back their involvement in Iran.
Why do European companies feel scared? Simply put, all of them have greater dealings with the US, and even those that do not have interests in the US market understand that depriving Iran of dealing with the dollar would expose it to bankruptcy.
The ending of the Total contract is proof that European politicians do not dictate decisions to their companies and will not be able to stand up to Washington.
European governments have failed to protect their companies’ contracts, even though they promised they would continue to deal economically with Iran according to the terms of the Joint Comprehensive Plan of Action (JCPOA), i.e. the nuclear deal with Tehran. Almost all major companies that have concluded deals with Iran are quickly withdrawing despite the potential losses from their exit.
The ending of the Total contract, which is very important to the Iranian oil and gas industry, and which the regime relied heavily upon, is proof that European politicians do not dictate decisions to their companies and will not be able to stand up to Washington. Tehran will also fail completely in its confrontation with the US.
Total was one of the first beneficiaries of the Iranian nuclear agreement with the West as, in 2015, it got a contract to develop phase 11 of the South Pars gas field, worth about $5 billion. A senior company official said at the time that it did not need US approval to start the deal. However, following President Trump’s warning in November against dealing with Iran, the French company retracted, closed its offices in Tehran, opened an office in Washington to coordinate with the US authorities, and finally announced last week that it would withdraw from Iran if it could not secure a waiver from US sanctions.
What is the power and authority Washington has over European companies? Well, the US market is estimated at $19 trillion and its annual trade with Europe is about $700 billion, so Iran’s deals look small in comparison. In addition, the US authorities can apply severe punishments — for example, they obliged the French bank BNP to pay $8.9 billion in fines for illicit dealings with Iran.
For this reason, German and French governments’ efforts to challenge the US and keep the Iranian nuclear agreement intact will be almost impossible to achieve due to the attitudes of both sides: Trump will not bend and Iran’s Supreme Leader Ali Khamenei will not change his policies or step back from conflicts.
Iran will soon realize that even though European politicians want the agreement, they cannot afford it because their companies’ hands are tied.
Consequently, Iran’s leaders must have understood that the agreement was dead the moment Barack Obama left the White House and Trump took office. Yet, instead of dealing with the new reality and reversing its erroneous calculations, Tehran has been running in all directions — to Brussels, Moscow, Beijing and New Delhi — but has not succeeded in offsetting its losses or finding alternatives. It is failing militarily in Syria, politically in Iraq and suffering losses in Yemen, and the losses are greater within Iran itself.
- Abdulrahman Al-Rashed is a veteran columnist. He is the former general manager of Al Arabiya news channel, and former editor-in-chief of Asharq Al-Awsat. Twitter: @aalrashed