Europe moves to safeguard interests in Iran after U.S. pullout

[May 12, 2018]  By Paul Carrel and Leigh Thomas

BERLIN/PARIS (Reuters) - Europe's largest economies lobbied to protect their companies' investments in Iran on Friday, seeking to keep the nuclear deal with Tehran alive after Washington pulled out and threatened to impose sanctions on European companies.

Germany and France have significant trade links with Iran and remain committed to the nuclear agreement, as does Britain, and the three countries' foreign ministers plan to meet on Tuesday to discuss it.

That is part of a flurry of diplomatic activity following Tuesday's unilateral withdrawal from what U.S. President Donald Trump called "a horrible, one-sided deal", a move accompanied by the threat of penalties against any foreign firms doing business in Iran.

German Chancellor Angela Merkel said ways to save the deal without Washington needed to be discussed with Tehran, while France's Finance Minister Bruno Le Maire said EU states would propose sanctions-blocking measures to the European Commission.

"Do we accept extraterritorial sanctions? The answer is no," Le Maire told reporters.

"Do we accept that the United States is the economic gendarme of the planet? The answer is no.

"Do we accept the vassalization of Europe in commercial matters? The answer is no."

British Prime Minister Theresa May and Trump agreed in a phone call that talks were needed to discuss how U.S sanctions on Iran would affect foreign companies operating in the country.

May's spokeswoman said May had told Trump that Britain and its European partners remained "firmly committed" to ensuring the deal was upheld as the best way to prevent Iran from developing a nuclear weapon.

Both Le Maire and Germany's finance minister Olaf Scholz had spoken to their U.S. counterpart Steven Mnuchin, urging him to consider exemptions or delays for companies already present in the country.

Le Maire said he was seeking concrete exemptions for countries already present in Iran, including Renault, Total, Sanofi, Danone and Peugeot. Scholz had also asked for concrete measures to help German companies, Handelsblatt newspaper reported.

The 2015 agreement between major powers and Iran set limits on its nuclear activities in exchange for the lifting of sanctions. Europeans fear a collapse of the deal could intensify conflicts in the Middle East.

Germany, France and Britain want talks to be held in a broader format to include Iran's ballistic missile program and its regional military activities, including in Syria and Yemen.

"The extent to which we can keep this deal alive ... is something we need to discuss with Iran," said Merkel, who earlier spoke with Russian President Vladimir Putin on the issue.

Divisions in Iran over how it should respond to the U.S. pullout were illustrated as senior cleric Ayatollah Ahmad Khatami told worshippers at Tehran University on Friday that European nations could not be trusted.

President Hassan Rouhani had said on Tuesday that Tehran would remain in the deal, provided its benefits stayed in force with its remaining signatories.

Iran's foreign minister will travel to Moscow on May 14 and meet his Russian counterpart, Russia's RIA news agency said, citing a Russian foreign ministry official.

French President Emmanuel Macron talks to German Chancellor Angela Merkel after being awarded Charlemagne Prize in Aachen, Germany May 10, 2018. REUTERS/Wolfgang Rattay/File Photo

"DAMAGE LIMITATION"

Iran said it had asked Europe's Airbus <AIR.PA> to announce whether it would go ahead with a plane deal with Tehran following the U.S. pullout.

That appears unlikely after U.S. Treasury Secretary Steven Mnuchin said on Tuesday that licenses for the planemaker and rival Boeing Co <BA.N> to sell passenger jets to Iran would be revoked.

Le Maire said Paris would seek to strengthen Europe's ability to block sanctions and provide investment finance to companies. He called for the creation of a body to monitor the implementation of EU sanctions rules.

Some fear Europe's room for maneuver is limited. "The Europeans are in the weaker position because they are not united," said Peter Beyer, Germany's commissioner for transatlantic relations. Trump's strength was that he did not need unity, Beyer added.

French exports to Iran doubled to 1.5 billion euros ($1.79 billion) last year, driven by sales of aircraft and automobile parts, according to customs data.

Exports of German goods to Iran rose by around 400 million euros to 3 billion euros. Around 120 German firms have operations with their own staff in Iran, including Siemens <SIEGn.DE>, and some 10,000 German companies trade with Iran.

"We are ready to talk to all the companies concerned about what we can do to minimize the negative consequences," Altmaier told Deutschlandfunk radio. "That means, it is concretely about damage limitation".

The U.S. ambassador in Berlin, Richard Grenell, said firms should question the morality of doing business with Iran.

"Germany, France and Britain, the 'EU3', say themselves that Iran poses a threat. Do they want to do business with a threat?" Bild newspaper quoted him as saying.

Altmaier said Germany wanted to avoid "a spiral of escalation" in transatlantic trade relations.

Merkel said at a church event in the western German city of Muenster: "It is in our interest to have a strong transatlantic relationship".

But she also said: "If everybody does what they like, then this is bad news for the world."

(Additional reporting by Joseph Nasr and Andreas Rinke in Berlin and Laurence Frost in Paris; Writing and editing by Paul Carrel, Thomas Escritt and Andrew Roche)

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