The following article is a short snippet from our longer Iran Q3 Forecast:
Relations with Europe
Iran and the remaining signatories of the JCPOA have met on different occasions and at various levels to figure out how to continue the implementation of the agreement without the US presence.
To support EU desire to save the JCPOA, on 6 June the European Commission adopted an update of the so-called blocking statute and of the European Investment Bank (EIB) External Lending Mandate. These measures are designed to protect EU companies engaged in Iran.
The new blocking statute addresses potential extraterritorial US sanctions against European firms, and the EIB External Lending Mandate has made Iran eligible for EIB investment. The European Parliament and European Council have until 6 August to object to these measures before they enter into force – before the first batch of re-imposed US sanctions takes effect.
While European institutions are preparing legal instruments, however, the fact is that most larger European entities will not risk conducting business in Iran. Even the EIB has indicated that it would be hesitant to finance projects in Iran as it must still finance some of its own activities through the US capital market.
The likely scenario is that the EU will manage mainly to encourage and protect European small and medium-sized enterprises (SMEs) in their engagement in Iran.
Financing arrangements
In order to facilitate financial transactions, the EU may appoint a so-called gateway bank to be in charge of all Iran-related transactions and thus reduce the burden of protecting a large number of second-tier European banks against potential US sanctions.
France’s finance minister, Bruno Le Maire, stated on 19 June that the EU’s priority would be to build independent, sovereign European financial institutions to allow financing channels between France, Italy, Germany, Spain, and other countries.
Pivoting east
As the main consequence of limitations on the European side, Iran is likely to pivot towards its Eastern partners.
In early June, President Hassan Rohani attended a meeting of the Shanghai Cooperation Organization (SCO). Iran has observer status in the SCO and is waiting to become a full-fledged member, which would consolidate its eastward trend in trade and political relations.
Rohani held meetings with President Vladimir Putin, President Xi Jinping of China, and Prime Minister Narendra Modi of India, who lead the key members of the SCO.
this article was taken from our monthly publication Iran Strategic Focus. To discuss the contents of the articles with our consultants or to discuss your business in Iran further then send an email to isf@menas.co.uk
