Here’s How Europe Plans To Counter US Sanctions On Iran

Will Racke | Immigration and Foreign Policy Reporter

The European Union said Monday it will immediately invoke a decades-old law to shield European companies from the reach of U.S. sanctions on Iran, part of the bloc’s bid to salvage a nuclear deal with Tehran.

First drawn up in the mid-1990s, Europe’s so-called “blocking statute” will go into effect Tuesday, according to the European Commission, which oversees the implementation of EU laws. The statute forbids European companies and courts from complying with foreign sanctions laws and allows firms to sue for damages incurred as a result of U.S. sanctions.

The rarely used law is part of Europe’s bid to prop up the 2015 Iran nuclear deal, which lifted international sanctions on Tehran in exchange for limits on its nuclear program. Washington withdrew from the deal in May and will reimpose the first round of “snapback” sanctions on Iran beginning Tuesday at midnight. (RELATED: Trump Slaps Sanctions on Iran That Obama Lifted)

“Preserving the nuclear deal with Iran is a matter of respecting international agreements and a matter of international security,” the EU said Monday in a joint statement with the European signatories to the deal — Britain, France and Germany.

Brussels’s blocking statute was last used in 1996 to work around the U.S. trade embargo of Cuba, ultimately leading to a political agreement with Washington that shielded European companies from secondary sanctions. Now updated to cover extraterritorial sanctions the U.S. is imposing on Iran, the law aims to mitigate the impact on European businesses operating in Iran and deter Washington from fully enforcing some restrictions.

Still, it remains to be seen if the law will do much to maintain European trade with Iran or protect the bloc’s firms from secondary sanctions, given Washington’s influence over international finance. Secretary of State Mike Pompeo said the Trump administration will fully enforce the snapback sanctions, and administration officials doubt the blocking statute is enough to keep European firms from leaving Iran.

“They are taking note and they are getting out,” a senior administration official told reporters Monday, referring to European companies. “So this is not something that we’re particularly concerned by.”

Indeed, many of Europe’s multinational firms have already chosen to wind down their operations in Iran rather than risk becoming a target of Washington’s secondary sanctions. French oil “supermajor” Total, Dutch shipping giant Maersk and German manufacturing conglomerate Siemens are just a few of dozens of European companies that have halted or scaled back operations in Iran following Washington’s pullout from the nuclear deal. (RELATED: French Oil ‘Supermajor’ Suspends Iran Project Due To Threat Of Sanctions)

To stem the outflow, Brussels will require firms to apply for EU authorization to leave Iran if they are doing so because of U.S. sanctions. EU officials say they will closely scrutinize waiver requests and issue exemptions based on criteria to be spelled out in separate guidance on Tuesday.

Meanwhile, Brussels is exploring other ways to maintain financial flows to Iran, including allowing member states to make direct payments to Iran’s central bank as payment for oil imports. Such a move would almost certainly run afoul of Washington’s sanctions on foreign financial institutions that do business with the Central Bank of Iran, which are set to be reimposed on Nov. 5.

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