Defying US sanctions, EU unveils €18 million aid package for Iran

Mohammad Javad Zarif (L), the Foreign Minister of Iran, and Federica Mogherini, the High Representative of the European Union for Foreign Affairs and Security Policy, speak at a joint media briefing prior to a dinner given at the European Commission, in Brussels, Belgium, 15 February 2016. [Olivier Hoslet/EPA]

The European Commission approved an €18 million support package for Iran on Thursday (23 August), sending an important signal to both Teheran and Washington that Brussels will not back down on its efforts to preserve the nuclear deal despite US sanctions.

The EU intends to help Iran in addressing key economic and social challenges and, in doing so, to offset the impact of the US decision to re-impose economic sanctions against Iran.

“This new package will widen economic and sectorial relations in areas that are of direct benefit to our citizens,” High Representative Federica Mogherini said in a statement.

At least €8 million will be allocated to supporting the private sector. The Commission will help “high-potential” Iranian SMEs, the development of selected value chains, and provide technical assistance to Iran’s Trade Promotion Organisation.

EIB cannot do business with Iran, bank chief warns

The European Investment Bank (EIB) would risk its business model if it invested in Iran,  because of the sanctions the US reinstated after its withdrawal from the nuclear deal, the president of the EIB  told the press on Wednesday (18 July).

The EU executive paved the way for the European Investment Bank (EIB) to enter the Iranian market and help soften the impact of US sanctions by providing financial assistance to companies in the country.

However, EIB president Werner Hoyer discarded the possibility of any EIB activity in Iran earlier this summer. “We would risk the business model of the bank if we would be active in Iran,” Hoyer said.

Brussels will also support Teheran in dealing with environmental challenges (€8 million) and will help drug harm reduction (€2 million) as well. This is the first package of a €50 million aid fund.

“With these measures, the EU demonstrates its support to the Iranian people and their peaceful and sustainable development,” Commissioner for International Cooperation and Development, Neven Mimica, stressed.

“It encourages the stronger involvement of all actors in Iran and in particular the private sector,” Mimica added in a veiled reference to EU companies hesitating over restarting operations in the country.

Blocking statute

The announcement arrives a few weeks after the US re-imposition of sanctions against Teheran entered into force. The sanctions have an extraterritorial impact, which Brussels consider illegal. Therefore, the EU reactivated its ‘blocking statute’ to try to soften it.

This mechanism bans Europeans – both companies and residents – from complying with US sanctions, although the EU can eventually authorise an economic actor to fully or partially comply with the sanctions.

However, enterprises applying the restrictive measures without authorisation will face penalties imposed by member states.

EU tries to soften impact of US sanctions against Iran as they re-enter into force

As a result of the Trump administration’s decision to withdraw from the Iran nuclear deal, Washington’s re-imposition of sanctions hit European companies operating in the country from Monday (6 August) onwards. The EU has updated its ‘blocking statute’ to temper the impact.

The ‘blocking statute’ also allows EU economic operators to recover damages that might result from those sanctions from the entities causing them. Furthermore, the EU does not recognise any court ruling enforcing US sanctions.

“We are determined to protect European economic operators engaged in legitimate business with Iran,” High Representative Federica Mogherini and E3 foreign ministers, Jean-Yves Le Drian (France), Heiko Maas (Germany) and Jeremy Hunt (UK) said in a joint statement.

However, European companies do not seem reassured and Brussels admitted that whether or not doing business with Iran given the circumstances remains a purely economic decision.

“European companies wanted to do business in Iran,” Luisa Santos, director for international relations at BusinessEurope, told EURACTIV. And lots of them want to stay in the market, she added.

But under these conditions “it is very difficult” so the “most likely scenario” is that European companies will refrain from doing business in Iran, she added.

Companies have to think about what market is more important for them, Iran or the US. “I am sure we all know the answer to that,” the BusinessEurope representative pointed out.

Brussels has repeatedly defended its commitment to strengthening economic ties with Iran in spite of the increasing tension with the Trump administration over its decision to withdraw from the Iran nuclear deal.

This aid package is another attempt to ensure that Iran still believes it is worth it to respect its compromises within the deal.

EU companies 'most likely to leave' Iran after US sanctions, business organisations warn

German carmaker Daimler has shelved its expansion plans in Iran due to the reimposition of US sanctions but it might not be the last EU company to pull the plug on future aspirations, businesses organisations told EURACTIV.

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