EU struggles to counter US sanctions on Iran: Report

Tasnim – European efforts to protect businesses investing in Iran from US sanctions risk leaving executives with the tough choice of whether to obey EU or American rules.

The EU is finalizing its plans to mitigate the punitive measures as the Trump administration prepares to impose a new wave of sanctions next month and in November, the Financial Times reported on Wednesday.

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

The main weapon the EU has developed is an updated version of a “blocking statute” originally drawn up in the 1990s to counter US sanctions on Iran, Libya and Cuba. The law forbids European companies from complying with the US measures and allows them to recover damages arising from the sanctions “from the person causing them”.

But lawyers and diplomats said there are doubts over the effectiveness of a tool that has never been properly tested.

“It’s a European policy that’s totally in contradiction to the American policy: that doesn’t happen very often,” said Jean De Ruyt, a senior adviser at Covington & Burling, the international law firm, and a former Belgian ambassador to the EU.

The dilemma was created after Donald Trump in May withdrew the US from the 2015 nuclear agreement between Tehran and world powers.

But Trump has suggested his administration will offer few waivers to companies. The US president used his toughest language yet against the Islamic regime this week, warning Iran it would face severe “consequences” if it threatened America. Hassan Rouhani, Iran’s president, this weekend said that reimposing new sanctions would equate to a “declaration of war against” the nation.

Roger Matthews, a senior lawyer at Dechert, said that if the EU was to give the blocking statute “enough teeth to have the effect they want, it’s just going to be a compliance nightmare with added legal expense”. He added that European Commission guidelines expected soon should provide more clarity.

Other EU proposals to insulate companies by offering them non-dollar denominated finance lines through institutions such as the European Investment Bank have run into troubles of their own.

Werner Hoyer, EIB president, said last week that it would “risk the business model of the bank” if it played an “active role” in Iran.

European diplomats hope they can still make progress in other areas, such as providing bilateral financing lines to Tehran and measures to make payments for oil directly to Iran’s central bank.

But without such carve-outs, the impact of the EU countermeasures is likely to be largely symbolic and insufficient to persuade many big businesses to engage with Iran.