US-Iran confrontation: EU stuck in difficult situation

Monday, 2018-08-27 16:56:34
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EU High Representative Mogherini and Iranian Foreign Minister Zarif address reporters following negotiations between P5+1 member nations and Iranian officials about future of Iran's nuclear programme.
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NDO – European countries are being caught between “two bullets” as Iran urges the European Union (EU) to continue doing business with Tehran, despite facing sanctions from the United States (US). Meanwhile, an array of EU companies are “fleeing away” from Iran, putting pressure on Europe in terms of maintaining the nuclear deal signed with Iran.

Under the pressure from Iran and the interests of European firms operating in the country, the EU recently announced a US$20.7 million package in support of Iran’s sustainable socio-economic development projects, including capital for the development of the private sector. This is the first sum in a EUR50 million aid package that the EU intends to offer to help Iran deal with its economic and social challenges, as committed to within the framework of the Iran nuclear deal, officially named the Joint Comprehensive Plan of Action (JCPOA).

The US Department of State (DOS) criticised that the EU’s plan to support Iran came at the wrong moment and could send a misleading message to the Tehran administration. The head of the DOS’s Iran Action Group, Brian Hook, expressed his concern that the EU support will lead the Iranian administration to continue the policies, which are said by Washington to produce “threats” to regional security. In the face of the risks of economic losses due to the US’s unilateral withdrawal from the JCPOA and its imposition of new sanctions on Iran, Iran’s Foreign Minister, Mohammad Javad Zarif, stated that Tehran still awaits guarantees for its oil sales and financial transactions from the EU.

Forced to choose between interests in Iran and the binding relationships in business with the US, a number of European companies withdrew from Iran as US sanctions against Teheran came into effect on August 6. French energy giant Total officially withdrew from its multi-billion dollar investment project in the aim of protecting its interests amid fears of US sanctions. French automaker PSA, including the brands of Peugeot, Citroen and Opel, announced last June that it was planning to cease operations in Iran, one of PSA’s major foreign market in terms of sales revenues. Franco-Italian aircraft manufacturer ATR is concerned about the fate of the 20 aircraft Iran has ordered. French airline Air France will stop flights to the Iranian capital of Tehran on September 18, explaining that its business operations have become ineffective as a result of new US sanctions against Iran. Air France’s decision came just after the UK’s British Airways announced it would cease operations of its direct flights to Tehran in September as the route is no longer commercially feasible. Last month, Dutch airline KLM also stopped providing flights to Tehran due to negative business results and financial outlook. Italy suffered damage in railroads and shipbuilding as Italy’s state railways, Ferrovie dello Stato Italiane, signed a contract to build a highway linking Qom and Arak in northern Iran. Shipbuilding firm Fincantieri, engineering firm Maire Tecnimont, and boiler manufacturer Immergas, are also “sitting on fire” as they have signed an array of deals with Iran.

The runaway wave of many European companies from Iran has caused huge economic losses for both sides. The EU has issued a law in response to US sanctions against businesses operating in Iran, which allows the European Investment Bank to fund projects in Iran. However, moves from Europe are not enough to protect the interests of both the EU countries and Iran. Iran has urged more drastic measures from Europe, while calling on the people to unite in order to overcome the economic pressures of the US.

While Europe neglected US protests to continue working with Iran in implementing the JCPOA, the US repeatedly threatened to impose tougher sanctions on Teheran. In the face of such an ally and a no. 1 economic partner as the US, Europe is seeking a solution to save itself from getting stuck in a tense US-Iran confrontation.