The reinstatement of US sanctions against Iran. Can the Europeans react?

(B2) Not content with reinstating American sanctions on Iran, Donald Trump also threatened his allies and other countries with similar sanctions if they decided to continue trading with Iran. Should Europeans be afraid? Can they react? What is the expected effect? Three fundamental questions…

Is the threat of extra-territorial sanctions effective for European companies even if the Europeans claim to want to leave the system intact?

Yes. At the economic level, the simple warning from Washington is causing large companies involved in the resumption of trade with Iran to sneeze in the cottages. It requires slowing down or at least re-considering any investment in Iran in the light of possible new American measures. The cost of investment will increase for large companies which will therefore have no other choice than to lower the level of their investments, or to go through circuitous routes, to avoid being caught in the trap. bag. Large companies in particular which trade in dollars, and cannot lose this guarantee, will have difficulty playing this game.

What is the possible effect of the American decision in the long term?

At first glance, it is European companies just as much (or even more) than American companies that are targeted by the reestablishment of sanctions. And if the Iranian economy could suffer, it should be able to find other alternatives on the international market. Russian and Chinese companies, but also Indian, Pakistani and Korean companies will strengthen their presence in Iran. Paradoxically, the American decision will strengthen the weight of the 'enemies' of the USA. Thanks Trump!

Can the Europeans react?

There is indeed a US anti-sanctions system which dates from 1996, in reaction to the Helms-Burton law on Cuba and the Amato-Kennedy law after the Lockerbie attack. But it was never really useful. It is based on a fairly voluntary basis, in the event that a company wants to file a complaint (which in international trade is quite risky). A device “ not very concrete according to an expert contacted by B2. Even Europeans hardly believe it. NB: Read our sheet: The US anti-boycott law of the European Union (V2): effective?

Can we harden this device? Or have other recourses?

In theory, yes. In practice, we seem doubtful. The European Commission has proposed to modify this regulation, mainly on questions of form (to allow a more autonomous power of delegation of the European executive). In the three years since the proposal was made (in February 2015), no new text has been adopted. According to information collected by B2, the subject was even buried at the bottom of the drawer by successive presidencies. This shows the desire of the 28 to use this instrument... There also remains the possibility for Europeans to lodge a complaint with the WTO in the event of the introduction of sanctions. You still have to want it…

(Nicolas Gros-Verheyde)