The German government is recognizing that if Washington were to enforce secondary sanctions against companies trading with Iran, Berlin would be unable to defend them.

On Sunday, White House National Security adviser John Bolton told CNN that US sanctions would not spare European companies. “It is possible,” he said, when asked whether Washington was prepared to impose sanctions on European companies.

London, Paris and Berlin have reiterated their commitment to the 2015 Iran deal, following the US withdrawal last Thursday. However, Berlin recognizes that it can do little to protect its companies.

Economy Minister Peter Altmaier made clear Germany views President Donald Trump’s unilateral withdrawal from the nuclear deal as wrong. However, the EU now hopes to persuade Washington from implementing secondary sanctions. Speaking to public broadcaster ZDF on Sunday, Altamaier said the government has 90 days to secure an exemption for EU companies dealing with Iran.

According to foreign minister Heiko Maas, shielding European companies is unworkable. “I do not see a simple solution to shield companies from all risks of American sanctions,” Maas told the Sunday’s Bild edition. Maas said that Germany wants to secure economic benefits for Iran to ensure Tehran remains committed to the terms of the agreement.

Meanwhile, Tehran is facing its own domestic opposition to the mounting cost of military and political intervention in Iraq, Syria, Yemen and Lebanon. In real terms, the standard of living has dropped by 15% over the last decade, given galloping inflation and the lack of investment. Officially, unemployment stands at 11% but could be as high as 15-20%.

There is now hope that Washington could be appeased if Europe could broker a deal with Tehran that has sufficient political dimensions.

Much depends on how the Iranian economy will respond to the current crisis.

Europeans are the biggest foreign investors in Iran since 2015, with Germany’s Daimler and France’s Total leading commitment to the country. However, US aerospace giant Boeing will also be making massive losses, as a $20bn order of aircraft from Teheran could now be cancelled.

For international analysts, all eyes are now on Iran’s banking sector. A US report by the Institute of International Finance (IIF) claims that non-performing loans in 2017 in Iran amounted to 12,5%; the latest official figure is 11,7%. Most of Iran’s 30 lenders were not profitable last year and are now selling non-core assets to build defensive positions.

The Iranian rial has lost 25% of its value, that is, a slide that will continue if the oil sector does not endure the pressure.

The oil sector is another key for the economy. Most Iranian exports are to China, Japan, India and South Korea. It is unclear how US sanctions will affect access to these markets. While Japan and South Korea are likely to comply, China and India are not as predictable.

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