Thursday, January 17, 2019
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EU moves to block US sanctions on Iran

EU to activate law that bans European companies from complying with US sanctions against Iran.

Jean Claude Juncker

The European Commission will launch the process of activating a law that bans European companies and courts from complying with US sanctions against Iran, after Washington pulled out of the landmark 2015 nuclear deal.

Jean Claude Juncker, president of the European Commission, said on Thursday the commission has a "duty to protect European companies" from American sanctions.

"We now need to act and this is why we are launching the process to activate the 'blocking statute' from 1996. We will do that tomorrow [Friday] morning at 10:30," he told a news conference in the Bulgarian capital, Sofia, after a meeting of EU leaders. 

The EU wants to salvage the nuclear deal and its blocking statute is the most powerful tool at its immediate disposal, as it means EU companies won't have to comply with US sanctions.

It also does not recognise any court rulings that enforce American penalties.

Juncker's announcement comes after US President Donald Trump withdrew Washington from the international deal with Iran, which placed limits on its nuclear programme in exchange for sanctions relief. 

Britain, France, Germany, China and Russia were signatories of the 2015 pact and have opposed the US pullout.

But companies around the world now face a difficult choice as Washington has threatened to punish firms that violate US sanctions by dealing with Iran.

Blocking statute 

The European Commission's blocking statute is seen by European governments more as a political weapon than a regulation, because its rules are vague and difficult to enforce, serving mainly as a warning to the US.

Juncker said the European Commission has decided to allow the European Investment Bank to facilitate European companies' investment in Iran for the first time. That could allow more euro-dominated loans to Iran. 

The blocking statute is a 1996 regulation originally created to get around Washington's trade embargo on Cuba. It says no foreign court judgments based on sanction laws have any effect in the EU.

Nervous companies

The French energy giant, Total, warned on Wednesday it will pull out of the multi-billion dollar project to develop the vast South Pars gas field, which started in July 2017, unless it is granted a waiver by US authorities.

Bijan Zangeneh, Iran's oil minister, announced Chinese state-owned oil company CNPC was ready to replace Total in Iran if it withdrawls.

Danish shipping giant Maersk Tankers also said Thursday it would cease its activities in Iran, while German insurer Allianz also announced plans to wind down its business deals there. 

Meanwhile, Russia moved to extend its economic influence in Iran.

In the Kazakh capital, Astana, the Russia-led Eurasian Economic Union trade bloc signed an interim trade deal with Iran that lowers tariffs on hundreds of goods.

The bloc, which also comprises Armenia, Belarus, Kazakhstan and Kyrgyzstan, plans to begin three years of talks with Iran that aim to create a free trade zone.

'Oil at $100 a barrel'

Total's CEO said on Thursday he wouldn't be surprised to see the price of a barrel of crude reach $100 later this year because of international political disputes.

"We are in a new world. We are in a world where geopolitics are dominating the market again," Patrick Pouyanne said at an event at a Washington think-tank.

Market ripples from Venezuela's economic distress and Trump's decision to exit the Iran nuclear deal have oil prices surging. On Thursday, a barrel of North Sea Brent briefly passed $80 for the first time since November 2014.

"You have the announcement on Iran, which is pushing the price up," said Pouyanne. "So I wouldn't be surprised to see $100 per barrel in the coming months."

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