The Great Escape of European Companies from Iran

Following the United States' withdrawal from the JCPOA last May, other major powers that signed the agreement expressed their determination to maintain it. In this context, the European Union and its three member states (the UK, France, and Germany) took on the primary role in preserving the 'JCPOA minus the US.' Subsequent events have shown that Europeans are facing increasing difficulties in their efforts to save the JCPOA. In fact, the three European countries that signed this agreement have tried nearly all possible solutions to encourage their companies to stay in Iran and no longer know what arguments or leverage to use to prevent their 'great escape' from Iran. Hope or despair? An article published on Wednesday, August 22 (31 Mordad) by Heiko Maas, Germany's Foreign Minister, in the 'Handelsblatt' newspaper reflects some of these difficulties. He implicitly points to Europe's weaknesses against the US in saving the 2015 nuclear agreement in Vienna between Iran and the 'P5+1' group, writing: 'It is inevitable that we (Europeans) strengthen our autonomy and for this purpose, we must create payment channels independent of the United States as well as a European monetary fund and an independent SWIFT system.' SWIFT, which stands for the Society for Worldwide Interbank Financial Telecommunication, plays a key role in facilitating and securing banking messages, serving as the main platform for transactions among financial institutions worldwide. Iran's access to this network, which was halted in 2012 due to international sanctions, was re-established after the implementation of the JCPOA, although it did not return to a completely normal status. Heiko Maas's writings may seem hopeful for supporters of the JCPOA's survival. However, if we look beyond the surface, the main message contained in this writing is filled with despair and bitterness for at least two reasons: 1) The German Foreign Minister effectively acknowledges that, under current conditions, given the existing mechanisms in international payment systems and the influence Washington has over these mechanisms, maintaining the JCPOA is not feasible. In other words, he defers the solution to a more or less distant future and emphasizes the necessity of decisions that require time to be made and implemented. We must not forget that international solutions, especially regarding financial and monetary processes, must navigate the complexities of lengthy negotiations. The 27 member countries of the European Union (excluding the UK, which is set to leave the union), which do not yet have a unified stance on relations with the US, must reach a consensus on creating a new 'SWIFT' and a European monetary fund to reduce their dependency on the US in order to preserve the JCPOA. How long will such a process take, given the existing complexities in relations among EU members? And will the JCPOA survive until this lengthy process is completed? 2) The fact that the German Foreign Minister postpones the resolution of issues related to preserving the JCPOA to such an uncertain future indicates his despair regarding the efforts made so far to encourage European companies to trade with Iran. Following Washington's official exit from the Vienna nuclear agreement, the European Union has used four main methods to maintain this agreement and encourage Iran to uphold its commitments: - Pressuring Washington to obtain licenses and exemptions for European companies wishing to continue trading and cooperating with Iran; - Creating the necessary conditions for the 'European Investment Bank' to finance European companies' activities in relation to Iran and fill the gap left by major European private banks that are unwilling to cooperate with Iran; - Opening special accounts for Iran in the central banks of EU member countries to facilitate transactions with the Iranian central bank and financial institutions; - Reviving the so-called 'blocking statute' enacted in 1996 primarily in relation to sanctions against Cuba. The EU's goal in enacting this law was to protect European companies wishing to trade with Cuba from US economic sanctions and to compensate for their potential losses. This time, in relation to the US exit from the JCPOA, Europeans decided to use the same law as a defensive shield regarding Iran. A painful choice None of these options have been effective, and the number of major European companies that have left or are in the process of leaving Iran has filled a long list, from Total and Engie to Shell, Peugeot-Citroën, Renault, Volkswagen, Mercedes-Benz, Siemens, Alstom, DZ Bank, and so on. These are well-known names whose return to Iran after the signing of the JCPOA did not only have economic consequences. Their presence in the country was a sign of hope for a people whose Islamic Republic has severed their connections with the economy and technology of the 21st century, and the beginning of a process that was supposed to turn Iran into a normal member of the international economic community. Instead, the collective exit of these companies is one of the sources of unprecedented depression that has engulfed Iranian society in recent months. They feel condemned once again to remain with second- and third-rate Asian companies and holdings under the command of the Revolutionary Guards. Why did European companies decide to abandon Iran despite the proposals made by their governments and the EU? Why have the 'solutions' offered by this powerful economic bloc, at the regional level or on a per-country basis, failed to convince large companies and banks to continue their activities in relation to Iran without fear of US economic sanctions? The answer to this question can be found in the painful choice imposed by the United States on European companies seeking economic cooperation with Iran: 'You must choose between the Iranian market and the American market.' In fact, Washington tells European companies: 'Trading and cooperating with Iran is your right, but in that case, you must forego the US dollar, US technology, the US market, and US financial and banking facilities.' A significant case: 'Total' To clarify the requirements of this difficult choice, we refer to the case of 'Total,' the French oil giant and a long-time partner in Iran's oil and gas industry. The news announced on Monday, August 29, by Bijan Namdar Zangeneh, Iran's Oil Minister, in Tehran was not surprising: the company 'Total,' the French oil giant, officially ended its participation in a project worth about $5 billion for the development of Phase 11 of South Pars, which was signed on July 12 of last year. That same night, Reuters confirmed the news based on a statement released by 'Total' in Paris. Total's share in this project was 50.1%, China's CNPC 30%, and Petropars 19.9%. The news was not surprising because after the final decision announced by the United States to withdraw from the JCPOA last May, it was clear that the French 'Total,' despite its previous promises not to bow to Washington's extraterritorial sanctions, could not continue its membership in the gas consortium for the development of Phase 11 of South Pars. However, this long-time partner in Iran's oil and gas industry chose to be patient and delayed the official announcement of its decision to leave the world's most important gas field. The fate of the oil contract between Iran and 'Total' reflects the realities of international relations, including in the economic sphere, and shows how the Islamic Republic, by ignoring these realities, has placed Iran in its current catastrophic conditions. With the signing of the Phase 11 South Pars contract, the French 'Total' was to bring the most advanced technology for exploiting gas resources to this field, which could help reduce the gap between Iran and Qatar in its exploitation. According to expert sources, the development plan for the South Pars gas field requires the construction of massive 20,000-ton platforms, which only giants like 'Total' can manage, while Iranian companies can only build platforms of 5,000 to 7,000 tons. For a reputable company like 'Total,' being present in South Pars, the world's largest gas field, was a real trump card. The fact that such a significant company is willing to forgo this trump card clearly indicates that the European Union has not had effective leverage in its efforts to maintain the presence of European companies in Iran or has not sufficiently understood the economic realities related to the activities of a large multinational company like 'Total.' Moreover, the European Union failed to obtain permission from Washington to ensure 'Total's' continued operations in Iran. Other solutions proposed by the EU were also not attractive to this French oil giant. Weighing the reasons for staying in South Pars or leaving it, the scales ultimately tipped in favor of the latter option. This decision primarily stemmed from the following factors: 1) 'Total,' as a multinational giant, operates in dozens of countries around the world, with a significant portion of its activities conducted in US dollars; 2) 30% of 'Total's' total shares are held by American shareholders; 3) 'Total's' assets in the United States are about $10 billion; 4) Approximately 90% of 'Total's' financing operations in various countries around the world are conducted through American banks. In the face of such realities, the solutions proposed by the EU to defend their companies against US economic sanctions, including the so-called 'blocking statute,' naturally lose their appeal. Under these circumstances, 'Total' has no choice but to leave Iran to avoid US penalties. Other European companies are also facing similar challenges and constraints that influenced 'Total's' decision-making.