This is a major development with ramifications in multiple directions. Trump’s move today introduces an ‘X’ factor in what is already an increasingly destabilized world. It is not to be expected that there will be an immediate outbreak of war on a large scale. But the intensification of the years-long economic war against Iran could be the result of current political activities – with far-reaching consequences for Europe.
German Business News spells out what this all means:
Economic war against Iran would hit Germany
A renewed intensification of the years of economic war against Iran would be to the detriment of the Europeans. Germany would be particularly affected.
A new economic war against Iran would hit the EU and Germany hard. DIHK* foreign trade chief Volker Treier told German Business News:
“Bilateral trade has increased noticeably since the easing of sanctions in 2015. In 2017 alone, the German economy sold 3 billion worth of goods, an increase of 16 percent over the previous year and 45 percent since 2015. Numerous German companies have reopened their branch offices in Iran, are selling their products in the Iranian market and planning investments with Iranian joint venture partners.
“However, the German-Iranian economic relations still lag short of their possibilities. Corporate finance is still a difficult undertaking. With the announcement of US President Donald Trump not wanting to extend the suspension of US sanctions on May 12, 2018, the slightly positive development in the Iran business is a big question mark.
“It is also uncertain how the Iranian government will behave in view of a possible US exit from the nuclear agreement and what consequences this will have for German companies. Already, many companies are worried about risking their US business because of trade with Iran. Particularly, the internationally active banks with US business would be confronted with even higher risks through reactivated US sanctions and could withdraw completely from the Iran business – with considerable consequences for the German companies that are being financed there.
Should the nuclear agreement fail, not only will bilateral economic relations suffer, but so too will confidence in international law as a whole. The Federal Government should work to maintain the nuclear agreement within the EU and with the US. Likewise, the federal government should work to improve the financing of the Iran business so that the Iran business really gets going.”
The danger that the US will speak out against the deal and the resurgence of sanctions should not be underestimated. On Sunday, US Attorney Donald Trump’s legal advisor Rudy Giuliani said the US government is even looking to overthrow the government in Tehran. Further, Israel,without providing specific evidence, has warned against an Iranian missile strike from Syria. The warning is remarkable because Israel has flown over 100 air strikes against primarily Iranian targets since the outbreak of the Syria war. Actually, the Israeli army is known for its precision. It is unlikely that Israel is said to have bombed those positions that are now identified as an immediate threat. In Israel, Prime Minister Benjamin Netanyahu is fighting for his political survival and therefore has an interest in making himself invulnerable to domestic politics through acts of war.
It is not to be expected that there will be an immediate outbreak of war on a large scale. But the intensification of the years-long economic war against Iran could be the result of current political activities – with far-reaching consequences for Europe.
The sanctions imposed on Iran by the UN, the US and the EU before the deal to force Iran to stop uranium enrichment paralyzed Iran’s economy, costing more than 160 billions of dollars in lost oil revenues just from 2012 to 2016, the BBC said. The deal with the US, on the other hand, provides Iran with access to more than $ 100 billion of its frozen assets frozen and lets Iran resell oil on international markets and use the global financial system for trade. If Iran violates any aspect of the agreement, UN sanctions will be reintroduced for ten years with the possibility of a five-year extension.
If the Joint Commission can not settle a dispute, it is referred to the UN Security Council. Iran also agreed to continue the UN arms embargo on the country for another five years, although it could end sooner if the IAEA is convinced that its nuclear program is completely peaceful. A UN import ban on ballistic missile technology will continue for up to eight years under the Atom deal.
European companies, in particular, have an interest in maintaining the nuclear deal. Al-Monitor states: “In practice, to protect the JCPOA, the EU should announce the creation of one or more EU-financed funds to unlock Iran’s economic and industrial potential. The first such fund should have the goal of making investments and technology transfers to make Iran a global natural gas power. Iran has the second largest gas reserves in the world, but has not been able to develop into a major player in the international gas markets due to the sanctions, in particular restrictions on technology transfer.
Once the first fund is set up, it could participate in existing and emerging projects that are both economically and technically feasible through European-Iranian joint ventures. Such projects would address defined Iranian objectives and could include:
Further expansion of gas production capacity in upstream projects, similar to the agreement signed by the Total consortium in 2017.
Investments in gas-based industries, petrochemicals and power plants. EU companies would be important sources of technology and investment, but could also partner with Iranian companies to develop regional opportunities – for example, by using Iranian gas in a third country to produce gas products.
Production of LNG and gas-to-liquids (GTL process) – both products could be exported to the EU and other world markets.
Invest in energy efficiency programs to improve Iran’s environmental and economic conditions and unlock more potential for clean energy exports.”
The European Union could enact legislation to protect its companies that are active in Iran when the US rescinds the 2015 nuclear deal and restores extraterritorial sanctions, the Reuters English-speaking service quoted Denis Chaibi, head of the EU’s Iranian Task Force for external actions. One of the options would be to restore “blockade rules” – a system of 1996 that would protect EU companies.
“We are looking at a number of possibilities. It is not complicated to do this legally because the legal instrument exists,” said Chaibi.
The arrangements were agreed in 1996 as a countermeasure to the US extraterritorial economic sanctions against Cuba, which, in the view of the EU governments, benefited US foreign policy interests at the expense of European sovereignty.
Michael Tockuss, Managing Director of the German-Iranian Chamber of Commerce, told state broadcaster Deutsche Welle about the energy relations between Germany and Iran: “We [Germany] do not buy crude oil from Iran. Our refineries are not designed to handle the sulfur-rich crude that Iran produces. Only Italy and Greece have refineries that can process it – so they are the main European importers of Iranian oil. Most Iranian crude oil is exported to China, India and other Asian countries. About 60 percent of Iran’s total trade income comes from oil and gas sales. That’s a lot – but the other 40 percent is also important. Iran is the country in the region that is the most industrially diverse in its economy. ”
This year, in the first two months, EU-Iran bilateral trade came to € 3.74 billion, up 17.4 percent from the same period last year. The most important trading partners of Iran in January and February 2018 were Italy with a bilateral trade volume of 844.92 million euros, France with 664.84 million euros, Germany with 545.83 million euros, Greece € 381.87, and Spain € 457.65 million. Even Luxemburg had bilateral trade with Iran totaling € 2.1 million.
Iran’s exports to the EU totaled more than 2.168 billion euros, an increase of 32 percent over the same period last year. Iran’s main export countries were Italy with an export value of 583 million euros, France 496.58 million euros and Greece 377.44 million euros.The exported goods mainly included mineral fuels, mineral oils and distillation products, bituminous substances and mineral waxes, petroleum oils and bituminous mineral oils, edible fruits and nuts, peel of citrus fruits or melons, iron and steel, plastics and articles thereof, ethylene polymers in primary forms, articles of iron or non-alloy steel, and fertilizers. This is apparent from data provided by Eurostat to the Financial Tribune.
*DIHK: The Association of German Chambers of Commerce