WarSclerotic

The European Union has announced a new regulation aimed at shielding European companies from the impact of US sanctions on Iran. The measure, which has been greeted with skepticism by the European business media, is unlikely to succeed: it expects European companies to risk their business interests in the US market for interests in the much smaller Iranian market.

The so-called “Blocking Statute” entered into effect on August 7, the same day that the first round of US sanctions on Iran officially snapped back into place. Those sanctions target Iran’s purchases of US dollars — the main currency for international financial transactions and oil purchases — as well as the auto, civil aviation, coal, industrial software and metals sectors. A second, much stronger round of sanctions targeting Iran’s oil exports, takes effect on November 5.

The action follows up on President Donald J. Trump’s decision on May 8 to withdraw from the 2015 Joint Comprehensive Plan of Action (JCPOA, also known as the Iran Nuclear Deal) negotiated by the Obama administration, which lifted sanctions on Iran in exchange for a freeze on its nuclear program.

The Trump administration said that the deal negotiated by the Obama administration did not go far enough to curtail Iran’s nuclear weapons program, or its ballistic missile program, or its malign behavior in the Middle East and elsewhere.

The reimposed US sanctions apply not only to American citizens and companies, but also to non-American individuals and companies. In a legal concept known as extraterritoriality, any company based outside of the United States must comply with American sanctions if it uses dollars for its transactions, has a subsidiary in America or is controlled by Americans.

In an August 6 statement, Trump said:

“The United States is fully committed to enforcing all of our sanctions, and we will work closely with nations conducting business with Iran to ensure complete compliance. Individuals or entities that fail to wind down activities with Iran risk severe consequences.”

In an August 7 tweet, Trump repeated that threat:

“The Iran sanctions have officially been cast. These are the most biting sanctions ever imposed, and in November they ratchet up to yet another level. Anyone doing business with Iran will NOT be doing business with the United States.”

In a joint statement, EU foreign policy chief Federica Mogherini and the foreign ministers of France, Germany and the UK openly admitted that for the EU the Iran deal is all about money and vowed to protect European companies from US penalties:

“We are determined to protect European economic operators engaged in legitimate business with Iran, in accordance with EU law and with UN Security Council resolution 2231. This is why the European Union’s updated Blocking Statute enters into force on 7 August to protect EU companies doing legitimate business with Iran from the impact of US extra-territorial sanctions.

“The remaining parties to the JCPOA have committed to work on, inter alia, the preservation and maintenance of effective financial channels with Iran, and the continuation of Iran’s export of oil and gas. On these, as on other topics, our work continues, including with third countries [China and Russia] interested in supporting the JCPOA and maintaining economic relations with Iran.”

In a joint statement, EU foreign policy chief Federica Mogherini (pictured) and the foreign ministers of France, Germany and the UK openly admitted that for the EU the Iran nuclear deal is all about money and vowed to protect European companies from US penalties. (Photo by Dean Mouhtaropoulos/Getty Images)

The Blocking Statute, originally adopted by the EU in 1996 to help European companies avoid US sanctions on Cuba, was updated in June 2018 to include sanctions the US is re-imposing on Iran. The document, riddled with EU jargon, states:

“The Blocking Statute allows EU [economic] operators to recover damages arising from the extra-territorial sanctions within its scope from the persons causing them and nullifies the effect in the EU of any foreign court rulings based on them. It also forbids EU persons from complying with those sanctions, unless exceptionally authorized to do so by the [European] Commission in case non-compliance seriously damages their interests or the interests of the Union.”

In other words, the EU is prohibiting EU citizens and companies from complying with US sanctions and is authorizing EU companies hit by US sanctions to sue the US government for compensation in European courts.

In addition, European companies that do pull out of Iran without approval from the European Commission face the threat of being sued by EU member states.

Many European commentators said the EU scheme would be unworkable, especially for European multinational corporations with business interests in the United States.

The London-based Financial Times wrote:

“Diplomats and lawyers have raised serious doubts about the EU’s ability to protect European businesses operating in Iran from the US measures.

“The blocking statute, first drawn up in 1996, has rarely been tested. One senior EU official said there was little legal precedent for judges in EU member states to reclaim damages from third countries like the US if sued by companies.”

In France, Le Figaro wrote that European Commission’s response to US sanctions was “hasty” and amounted to a “political gesture.”

Le Monde described the EU’s measure as a “political signal for the Iranian regime, which demanded signs of European commitment to defend the JCPOA.”

L’Express noted: “If a company is active in the big US market and the small Iranian market, then it does not benefit much from the fact that its activities are protected in Europe and Iran but not in the United States.”

Radio France Internationale (RFI), a French public radio service, said that the effects of the Blocking Statute would be “more symbolic than economic.” It added:

“The law would be more effective for Small and Medium-sized Enterprises (SMEs) doing business in Iran. For large corporations, the solution lies in negotiating waivers or exemptions with the United States. But such requests from France, Germany and the United Kingdom have already been rejected by Washington.”

La Croix wrote:

“Suffice to say that the implementation of this blocking law remains very hypothetical, as it goes into uncertain legal territories.

“Total, Maersk and Peugeot have already decided to leave Iran. Moreover, companies investing in Iran do not seem to believe much in the effectiveness of the regulation. The oil group Total, the ship-owner Maersk or the automaker Peugeot have already decided to leave. German group Daimler announced its withdrawal from Iran yesterday. These groups are more afraid of the US’s ability to implement sanctions than the EU’s wrath.”

In Germany, the public broadcaster ARD published an opinion article by Brussels correspondent Samuel Jackisch titled, “Well Roared, Paper Tiger — EU Defenseless against US Sanctions.” He said that the EU’s new policy was “logical, but largely meaningless,” and an attempt by EU foreign policy chief Federica Mogherini to “defend her political legacy.” He added:

“The EU can try to turn the tables on transatlantic relations, but in the end the US still comes out on top.

“The German export industry’s business with Iran may not be small at around three billion euros. However, the bottom line is that the same companies export 35 times as much to the USA. The EU is demanding that its largest corporations risk the entire cake for a few more crumbs.”

German public broadcaster ZDF wrote:

“The peculiar construction of the EU Blocking Statute remains: Ordinarily, regulations and laws prohibit something. For example, an anti-dumping law prohibits companies from price dumping in order to force competitors out of the market. But the EU Blocking Statute is a call to action: Do trade with Iran and do not let threats from the US president dissuade you!

The newspaper Westdeutsche Allgemeine Zeitung quoted the Chief Executive of the German Chamber of Industry and Commerce (DIHK), Martin von Wansleben, who described the EU’s measure as a “helpless political reaction.” He said that its purpose was to show that the EU does not bow to US sanctions. For individual companies, he said, the blocking regulation has “no relevance.”

In Austria, Der Standard wrote:

“The Blocking Regulation is not an effective antidote to US sanctions, as the historical example suggests…. Although Washington should refrain from extraterritorial sanctions, the US market is too important for corporations to expose themselves.”

In Italy, Südtirol News quoted stock market expert Robert Halver of Baader Bank:

“Due to the US sanctions against Iran, German industry will not touch Iran. If you realize that German industry is doing a hundredfold business in America, you will not do business with Iran, because then sanctions against German companies will exist. Therefore, Iran is certainly going to bleed very heavily at the moment.”

The European edition of Politico wrote:

“Some experts say the EU’s moves are unlikely to have the desired effect, arguing that the blocking statute would create legal burdens for Europe-based companies without preventing the US from targeting their American branches and assets. For many companies, the risk of being cut off from business in the US — a far bigger market than Iran — is enough to make them want to comply with Washington’s demands.”

An investment banker quoted by Reuters said:

“It would be suicide to do any new business or funding for Iran or Iran-related companies without explicit guarantees from the US government. They have us by the throat because so much business is conducted and cleared in dollars. The fines are in the multibillions these days so it’s just not worth the risk for a small piece of business and maybe pleasing a European government.”

As if to prove the point, moments before US sanctions against Iran entered into force, Daimler, the German car and truck manufacturer, dropped plans to expand its Iran business. “We have ceased our already restricted activities in Iran in accordance with the applicable sanctions,” Daimler said in a statement.

Daimler follows similar decisions by: Adidas (Germany); Allianz (Germany); AP Moller-Maersk (Denmark); Ciech (Poland); Citroen (France); CMA CGM (France); DZ Bank (Germany); Engie (France); ENI (Italy); Lloyds (UK); Lukoil (Russia); Maersk Tankers (Denmark); Oberbank (Austria); Opel (Germany); Peugeot (France); PGNiG (Poland), Renault (France); Scania (Sweden); Siemens (Germany); Swiss Re (Switzerland); and Total (France).

Soeren Kern is a Senior Fellow at the New York-based Gatestone Institute.

“The past is a foreign country: they do things differently there.” This is how English writer L.P. Hartley, in his novel The Go-Between, comments on the ambiguity of our relations with a past that fascinates and confuses us. I was reminded of Hartley’s enigmatic phrase last week as I skimmed through a series of news stories indicating the discovery by the Khomeinist establishment in Tehran of Iran’s past.

There was Iran’s President Hassan Rouhani advising US President Donald Trump not to ignore Iran’s “7,000-year old civilization” in stark contradiction to Ayatollah Khomeini’s claim that the whole of Iranian history before his seizure of power should be classified as “jahiliyah” (darkness).

Then there were the so-called “reformist Khomeinists” who took US Secretary of State Mike Pompeo to task for expressing support for what is reported as a national uprising in Iran. They invited Pompeo to remember Mohammad Mosaddeq, the man who served as Prime Minister of Iran in the early 1950s and, so his supporters believe, was overthrown in a putsch backed by the United States. “Mussadeq was the hero of Iranian national uprising,” one Khomeinist apologist commented. He forgot that according to the propaganda of the regime he has served for almost four decades, Mussadeq was “a traitor and enemy of Islam” and that he had become a non-person in the Islamic Republic.

You may also remember the recent brouhaha made about the discovery of mortal remains reportedly belonging to a mummy of Reza Shah the Great. According to the governor of Rey, the place where the remains were discovered, the mummy was quickly reburied “with full respect” on orders from Iran’s Supreme Guide, Ali Khamenei. What a contrast with the campaign by Ayatollah Sadeq Giwi (alias Khalkhali), one of Khomeini’s key associates, to have the Pahlavi king’s mummy burned in public.

And what about this surprising comment by the head of Iran’s Department of Environment, Isa Kalantari, that “for over 7,000 years Iranians knew how to manage their natural resources”, an art that has disappeared during the four decades of Khomeinist rule, threatening Iran with “total destruction”?

Nostalgia for the past doesn’t stop there.

Tehran’s government-controlled media are full of stories about ancient relics, old buildings and historic sites that recall Iran’s glories over millennia. Even hoses that once belonged to the grandees of the ancien régime, and the Qajar dynasty before that, are featured admiringly amid calls for them to be classified as national treasures and preserved. Again, what a contrast with the heady days of four decades ago when Khomeini and his cohorts fanned the fires of rage and called for destruction of whatever reminded Iranians of the past.

Nostalgia for the good old days that had initially been branded “the bad old days” is not limited to historic events and figures or relics and buildings. Scavenging in the past the Khomeinist clique is also beginning to discover other “goodies”.

In May, Iran’s Deputy Foreign Minister for Arab-African Affairs, Hossein Jaberi Ansari, astounded European Union officials when, in a visit to Brussels, he suggested that an association accord signed between the Shah’s regime and the then European Economic Community in 1975 be revived restoring to Iran a series of privileges that the Islamic Republic today couldn’t even dream of. Under the agreement signed by the then Iranian Economy Minister Hushang Ansary and the Common Market’s Commissar for Foreign Trade Lord Tugendhat, Iran was given tariff-free access for its agricultural and manufactured goods and granted special facilities for raising capital on European markets.

That is not all. Facing almost total diplomatic isolation, the Khomeinist clique have also revived the idea of a regional cooperation framework that could include Iran, Turkey and Pakistan on the lines of the Regional Cooperation for Development (RCD) outfit that Iran created under the Shah.

The Iranian military’s Chief of Staff, Gen. Mohammad Bagheri, is also chasing another elusive gazelle from the past: a system of military cooperation with Turkey and Pakistan. Such a gazelle existed under the Shah and was called the Central Treaty Organization (CENTO). It also included Great Britain as full member and the United States as associate member. (The US didn’t become a full member because Iran did not accept the NATO-like arrangement under which, in case of war, troops of all member states would be under US command. Iranian law prohibited putting Iranian troops under foreign command; a reason cited by the Shah for refusing to send troops to the wars in Korea and then Vietnam, while Turkey did take part under US command.)

Iran’s Foreign Minister Mohammad Javad Zarif has also rediscovered an enticing piece of the past, in the form of two cooperation accords signed between Iran and the United States in the 1950s to give a legal framework to American humanitarian aid to Iran, mostly in the form of mass vaccinations and the building of schools and clinics under President Truman’s CARE and Point IV scheme, which continued until 1964, when Iran announced it no longer accepted foreign aid.

Zarif’s argument is that those accords contradict President Trump’s threatened decision to impose new sanctions on the Islamic Republic.

Iran’s Foreign Minister Mohammad Javad Zarif claims that cooperation accords signed between Iran and the US in the 1950s contradict President Trump’s threatened decision to impose new sanctions on the Islamic Republic. (Photo by Lennart Preiss/Getty Images)

The Khomeinist clique has also discovered that before the mullahs seized power, Iran had visa-free travel agreements with 34 countries, including virtually all present-day members of the European Union. Today, however, the reaction of all those countries to Zarif’s demand to restore the agreement is stark: That was then, and this is now!

Another discovery by the Khomeinist clique concerns the 1972 accord with Afghanistan regarding the sharing of waters from four border rivers: Hirmand, Parian, Harirud and Farah. Having denounced the accord as a betrayal of Islam, the Khomeinist clique is now demanding that Kabul implement it, to save large chunks of Iran from economic death due to shortage of water.

At the opposite side of the country, the clique has rediscovered the 1975 Algiers Agreement with Iraq, under which the two neighbors share sovereignty over the border estuary Shatt al-Arab. Last Tuesday President Hassan Rouhani threatened to shut the Shatt al-Arab, presumably to prevent Iraq from exporting oil, if and when President Trump tries to impose an oil export ban on Iran. What Rouhani didn’t know is that Iraq isn’t exporting oil through the Shatt al-Arab and that Iran’s refusal to implement the Algiers Agreement has prevented the dredging operations needed to reopen the estuary and reactivate the Iraqi port of Basra and its Iranian sister-port of Khorramshahr.

Ayatollah Khomeini and his successors branded all accords that Iran signed under the Shah as “a Zionist conspiracy against Islam.” Now they are trying to eat humble pie in the hope of regaining some of the privileges Iran lost when they seized power.

However, in Iran today, as in Hartley’s novel, the past remains a foreign country where people do things differently.

Amir Taheri was the executive editor-in-chief of the daily Kayhan in Iran from 1972 to 1979. He has worked at or written for innumerable publications, published eleven books, and has been a columnist for Asharq Al-Awsat since 1987.

This article was originally published by Asharq al-Awsat and is reprinted by kind permission of the author.