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Companies Face A Tough Choice After Trump Pulls Out Of Iran Nuclear Deal

May 16, 2018
Originally published on May 16, 2018 11:06 am

The 2015 nuclear deal with Iran was heralded as the reopening of the country's battered economy, and big foreign companies such as Airbus, Siemens and Samsung rushed to take advantage of the opportunity.

Now that President Trump has effectively closed the door again, those same companies have to choose between remaining in Iran and staying on the good side of the U.S. government.

The risks they run are sizable. Over the weekend, National Security Adviser John Bolton told CNN's State of the Union that the U.S. was willing to impose sanctions on foreign companies that continue to do business in Iran.

"I think the Europeans will see that it's in their interest ultimately to come along with us," Bolton said.

European officials have insisted that the Iran deal is very much alive and say pushing back against Washington's threats is a matter of protecting their sovereignty.

"Do we want to be a vassal that obeys and jumps to attention?" Bruno Le Maire, the French economy minister, said in a radio interview.

As a practical matter, however, Washington has a powerful weapon to punish foreign companies that won't toe the line: It can bar them from ever doing business in the United States.

The European airplane company Airbus, for instance, has a contract to provide some 100 aircraft to Iran Air, which is operating with an aging fleet of planes.

Because the U.S. is the source of many of the parts used in Airbus planes, being barred from the American market would be almost impossibly disruptive.

"They would have to strip out all the U.S. components in their airplanes. I don't know whether that's technically possible, but I think it would be very, very difficult," says Danforth Newcomb, a sanctions lawyer at Shearman & Sterling.

More important, Washington could bar foreign companies from the U.S. market, which is still the largest in the world. That's something very few multinational firms want to see happen.

"Faced with the decision to risk what is in almost all cases major business in the U.S., as opposed to a little bit of business in Iran, I would imagine most companies would probably decide not to continue their Iranian business connections," Wolfgang Ischinger, former German ambassador to Washington, told NPR's Morning Edition on Tuesday.

"The European economies and Asian economies have a lot more trade with the United States. So, ultimately they cannot completely ignore U.S. demands," says Nader Habibi, a professor of the economics of the Middle East at Brandeis University.

In fact, a lot of companies began turning their backs on Iran when Trump was elected, and that's one reason why Iran's much-touted economic revival has proven to be a disappointment within the country, Habibi says.

During his campaign, Trump repeatedly promised to scrap the Iran deal, which "made some firms cautious to begin with," Habibi says.

Meanwhile, most American firms have steered clear of the Iranian market from the beginning. The 2015 nuclear deal lifted sanctions for foreign companies, but U.S. firms, with a few exceptions, were always barred from doing business in Iran.

Whether the U.S. government would really follow through on its threat to punish Asian and European companies doing business in Iran is unclear.

Sanctions existed before the 2015 deal and were selectively applied, Newcomb says.

Moreover, Trump has sometimes made dramatic policy announcements, such as tariffs on steel and aluminum imports, only to walk them back later. Last week's decision to withdraw from the nuclear deal may be at least in part a negotiating ploy, Newcomb says.

"I think what the president is doing is gambling that this kind of pressure will result in a better deal, which is what he always said as part of his campaign," he says.

But for now, the considerable uncertainty over tariffs means few foreign companies are willing to gamble that Trump is less than serious.

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DAVID GREENE, HOST:

All right. So President Trump's decision to take the United States out of the Iran nuclear deal put the U.S. at odds with some close allies in Europe and Asia, and it gives companies like Samsung and Renault a difficult choice. They do business with Iran but now face potential sanctions if they don't stop. Here's NPR's Jim Zarroli.

JIM ZARROLI, BYLINE: President Trump may have abandoned the Iran nuclear deal, but European officials have made clear they see the agreement as very much alive. Here is EU external affairs chief Federica Mogherini.

(SOUNDBITE OF ARCHIVED RECORDING)

FEDERICA MOGHERINI: The European Union will remain committed to the continued full and effective implementation of the nuclear deal.

ZARROLI: But Trump's decision leaves other countries in a difficult spot. Before the agreement was signed in 2015, the U.S. imposed secondary sanctions against overseas companies. If they did business in Iran, they couldn't do business in the U.S. Dan Newcomb is a New York attorney who specializes in sanctions law.

ZARROLI: In broad strokes, what secondary sanctions say is, Iran or the U.S., which one do you want?

ZARROLI: After the 2015 nuclear agreement, those secondary sanctions came to an end, and companies like Airbus and Siemens rushed to do business in Iran. Now, the U.S. has walked away from the agreement. In theory, those companies could stay in Iran, but if they do, national security adviser John Bolton told CNN this weekend they could face the wrath of the U.S.

(SOUNDBITE OF ARCHIVED RECORDING)

JOHN BOLTON: I think the Europeans will see that it's in their interest ultimately to come along with us.

ZARROLI: And because the U.S. is such an important part of the global economy, few big companies will want to get on its bad side. Nader Habibi is professor of Economics of the Middle East at Brandeis University.

NADER HABIBI: The European economies and Asian economies have a lot more trade with the United States. So ultimately, they cannot completely ignore U.S. demands.

ZARROLI: Take the European company Airbus. It's under contract to sell a hundred aircraft to Iran Air. But Dan Newcomb says going ahead with the sale now would present the company with an impossible choice. A portion of the parts it uses to make the planes it sells are made in the United States.

DAN NEWCOMB: They would have to strip out all the U.S. components in their airplanes. I don't know whether that's technically possible, but I think it would be very, very difficult.

ZARROLI: But whether things would actually go that far is another question. As a lawyer, Newcomb is hearing from a lot of his clients these days who want to know whether to walk away from Iran, and he essentially advises them to wait and see. After all, as the steel and aluminum sanctions showed, Trump has sometimes made dramatic pronouncements about policy decisions only to walk them back later on.

Jim Zarroli, NPR News, New York. Transcript provided by NPR, Copyright NPR.