News Analysis |
Iran’s deputy foreign minister Abbas Araghchi has warned the signatories of Joint Comprehensive Plan of Action (JCPOA), commonly known as Iran nuclear deal, that Iran is considering to exit if Europe fails to provide sufficient financial guarantees. In the “Intensive Care Unit (ICU)”, was the phrase he used to describe the state of the agreement. After the United States of America pulled out unilaterally from the agreement last month, rest of the signatories convened in Vienna to discuss the future of the 2015 nuclear deal.
Abbas Araghchi made these remarks in the same conference on Friday. “I told the conference today that the JCPOA is in the intensive care unit because it has lost its balance as a result of the US withdrawal from the deal,” Araghchi was quoted as saying by Iran’s Mehr news agency. Clouds of uncertainty and dismay are hovering over the prospects of the deal since the USA decided to pull out. It remains to be seen that to what extent the move from Trump administration is going to hurt Iran financially.
The guarantees which Mr. Araghchi is looking include the assurance from rest of the signatories, especially Germany and France, that investment from European companies will not be affected and it will continue to remain in the Iranian economy. Iran’s largest export to the rest of the world is crude oil. He also asked that European crude oil transactions through Iranian banks must continue to operate “without any problems”.
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.
After the repeated rounds of persuasion failed, German Chancellor Angela Merkel and French President Emmanuel Macron decided to salvage the nuclear deal. In order to protect EU companies from the influence of U.S. sanctions, a 1996 “blocking statute” law was reenacted. The amendment was passed by European Parliament in the late 90’s to protest the economic interest of Europe while dealing with Cuba, a communist country which was facing several embargoes from the United States of America.
The law enables the companies not to comply with the U.S. sanctions and even it also does not recognize any court rulings that enforce American penalties. But the experts say that the law is quite outdated and the United States has already come up with counter legislation which restricts the access to American Banking System for the companies which trade with sanctioned countries.
Since most of the European companies operating in Iran are multinational such as Total, dealing in dollars, the law is unlikely to give the corporate giants a relief from U.S sanctions. Several European countries have quit business with Iran following the US exit. Iran following the US exit. Danish shipping giant Maersk Tankers also said Thursday it would cease its activities in Iran, while German insurer Allianz announced plans to wind down its business deals there. Italian steel manufacturer Danieli announced it has halted work on finding financial coverage for orders it won in Iran worth 1.5 billion euros ($1.8bn).
The French energy giant, Total, warned that it would pull out of a multibillion-dollar project to develop the vast South Pars gas field, which started in July 2017, unless it is granted a waiver by US authorities. When European companies are moving out of Iran, China and Russia are finding it a viable opportunity and moving in to take over the market.
Iran’s largest export to the rest of the world is crude oil. He also asked that European crude oil transactions through Iranian banks must continue to operate “without any problems”.
Iran’s oil minister, Bijan Zangeneh announced that if Total decides to wrap up its operation in Iran, China’s state-owned oil company CNPC is ready to take replace it. Similarly, 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.
Another important question which remains to be answered is that will Iran go back to enriching weapons-grade uranium again once it officially backs out of the deal? Most probably, no. Iran recently announced the opening of a new nuclear facility at Natanz which will produce more centrifuges, the apparatus used in the enrichment process. But the likelihood of going back to the ambition of making an atomic bomb is very low as Iran’s economy is already very fragile. It is not in a position to bear the pressure of global sanctions as North Korea is facing at the moment.