Major European and US companies are braced for a potentially crippling fallout from President Donald Trump’s decision to pull out of the Iran nuclear deal.

Nations still supporting the Iran plan

France, Germany and the UK said they – along with China and Russia – would continue to honour the Joint Comprehensive Plan of Action (JCPoA) signed in 2015, under which Tehran agreed to cut its capabilities to create nuclear weapons in return for the lifting of crippling sanctions.Although the European Union said it was drawing up plans to protect companies from the effects of the re-imposition of an American trade embargo, the US administration is threatening sanctions against nations that did not join its boycott of Iran.While White House sources have suggested some, unspecified exemptions could be negotiated, US National Security Adviser John Bolton is reported as saying that European companies doing business in Iran will have to stop within six months or face sanctions.Any renewed reduction in oil production could also affect the likes of China, India and Korea, the biggest customers for the oil, which Iran has been pumping vigorously since sanctions started to be lifted in 2016.

Price of oil

Immediately after Mr Trump’s announcement, the price of crude rose to its highest level in more than three years. Jasper Lawler, an analyst at CMC Markets, believes the world should brace itself for higher oil prices in the long term. “With Venezuela still firmly in crisis and now Iran potentially facing sanctions, we could easily find that plus $70 per barrel becomes the new norm in a market which has already been tightened by OPEC,” he said.Some major European companies have become heavily involved in Iran since the JCPoA was signed. Total and Royal Dutch Shell have entered into lucrative agreements, Volkswagen has resumed exporting cars and trucks, and Renault has agreed to build a factory near Tehran.

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‘With-us-or-against-us’ sanctions

But it is civilian plane-makers Boeing and Airbus who stand to lose most. The two rivals have signed multi-billion dollar deals to sell a total of 180 aircraft to IranAir and, although Airbus is a European company, it depends on US-made parts to build its planes.Officials at Airbus, which has so far delivered just three of the 100-plane contract, said it still hoped to complete the deal but Adam Smith, a lawyer at global law firm Gibson Dunn and a former US Treasury sanctions official, said any European companies with a US arm that agreed a deal with Iran would now be violating US law.“Those not active in the US could be hit with a ‘with-us-or-against-us’ sanction, in which Washington would tell the company that if it wants to keep trading with Iran they can’t trade with America,” he said.US Treasury Secretary Steven Mnuchin said in the wake of Mr Trump’s announcement, “The Boeing and (Airbus) licenses will be revoked. Under the original deal, there were waivers for commercial aircraft, parts and services, and the existing licenses will be revoked.”

European businesses at higher risk

Carl Bildt, the former Swedish prime minister, said that Mr Trump’s decision could end up hurting European companies much more than American ones. “US Iran sanctions are hardly hitting any US companies, but aim primarily at European ones,” he tweeted. “This is a behaviour with secondary sanctions that in the past the EU has considered to be utterly unacceptable.”Eric Schweitzer, the head of the Association of German Chambers of Commerce and Industry said the US decision could hit Germany’s economy hard after many new business relationships had been forged since 2016.He warned that the “unilateral actions by the US government now subject this business to big reservations” because of the punitive sanctions companies might face from the US. Trade between Germany and Iran reached $4 billion last year, according to the foreign trade association BGA.

Re-evaluating the risk of Iranian deals

Michael Harris, director of financial crime compliance at LexisNexis Risk Solutions, agreed that any companies with deals in Iran now risked violating US sanctions and needed to plan accordingly.“Any organisation conducting business with Iranian individuals, companies or related entities could actually find themselves subject to sanctions due to the United States’ withdrawal from the Joint Comprehensive Plan of Action, and subsequent re-implementation of secondary sanctions,” he said. “With such a significant change in position from the US, it is vital that firms re-evaluate their dealings with censured entities and regularly screen their customers against the latest and most relevant sanctions lists.“If not, they risk breaching sanctions, facing unprecedented fines and reputational damage, as well as repercussions for future business with the United States.”In a joint statement issued after Mr Trump’s announced, Prime Minister Theresa May, Chancellor Angela Merkel and President Emmanuel Macron described Mr Trump’s decision as a matter of “regret and concern”.For related news and features, visit our Enterprise section. Find out more about our upcoming Relocate Awards. Relocate’s new Global Mobility Toolkit provides free information, practical advice and support for HR, global mobility managers and global teams operating overseas.Access hundreds of global services and suppliers in our Online Directory

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