The EU’s response to Donald Trump’s sanctions on Iran is unravelling after European businesses defied their calls to maintain investment in the country.
The European commission on Tuesday had used unprecedented legislation to maintain trade with Tehran and convince it to abide by the 2015 nuclear deal despite US withdrawal.
On paper its “blocking statute” shields EU businesses from the effects of US sanctions and gives any firm hit by them to claim compensation.
Crucially, the commission also said it “forbids EU persons from complying with those sanctions, unless exceptionally authorised to do so.”
EU foreign policy chief Federica Mogherini said firms “should comply with European legislation rather than with American ones.”
But the effectiveness of the EU’s response was undermined on Wednesday when major European companies defied the warnings not to comply with US sanctions.
Their decision comes after Trump said no businesses trading with Iran could continue to access the US market.
German car and truck manufacturer Daimler, which makes Mercedes vehicles, said it was complying with US sanctions as it announced it was pulling out of plans to expand its operation in the country.
“We have ceased our already restricted activities in Iran in accordance with the applicable sanctions,” a company statement said.
French car manufacturer Renault also said it would be complying with US sanctions, having previously announced plans to increase production capacity in the country.
French oil and gas giant Total said it would comply with US sanctions unless it receives a waiver.
And Danish engineering firm Haldor Topsoe said it was cutting 200 jobs in the country as a result of the sanctions.
EU companies complying with US sanctions were supposed to apply for permission from the European commission.
The commission said today it hadn’t received any such requests despite the growing number of companies who say they are pulling out of Iran.
In a climbdown from the strong language in its new legislation, the commission said it wouldn’t take any action against firms flouting their warnings not to comply with US sanctions.
Commission deputy chief spokesperson Mina Andreeva said: “They are free to choose whether to start working, continue working or cease business operations in Iran … on the basis of their assessment of the economic situation.”
She added: “The EU blocking statue is there to help. The effects of the US sanctions are minimised if you want to continue to do businesses in Iran. But whether you do so or not is a decision that will depend on several factors … companies are of course free to take that decision and communicate it accordingly.”