Europeans Rush to Profit from Iran Deal - Soeren Kern

by Soeren Kern

• Middle East expert Ilan Berman points out that for Iran, trading with Europe is actually the perfect self-defense, a virtual guarantee that it will not face military attack if it cheats on its obligations under the nuclear deal.
• Sanctions will also be lifted on Supreme Leader Ali Khamenei's $95 billion business empire, as well as on Iran's Islamic Revolutionary Guard Corps, which operates a vast network of companies and industries. No wonder European media outlets are referring to Iran as the "new El Dorado," the "chance of a century," and the "last untapped market."
• "Conducting business with the Iranian regime means to finance the nuclear program, the annihilation threats against Israel, Holocaust denial, the export of Islamist terror and the oppression of the Iranian population." — Stop the Bomb, Austria.
• "Everyone is looking at Iran with greed." — Senior French official.

European politicians and business leaders, resembling the running of the bulls in Spain, are falling over themselves in a rush to secure the "first-mover" advantage in Iran's $400 billion economy.

Under the nuclear deal reached in Vienna on July 14, international sanctions will be removed on Iran's banking, energy and trade sectors if Tehran agrees to certain curbs on its nuclear program.

The lifting of sanctions on Iran, a market of 80 million consumers (the second-largest market in the Middle East after Turkey in terms of GDP) creates the potential for staggering business opportunities.

Iranian officials say that investments of $185 billion are required in the oil and gas sector alone during the next five years. The mining sector requires $29 billion between now and 2025. Iran hopes to triple the number of cars manufactured in the country to three million a year by 2025.

Sanctions will also be lifted on Supreme Leader Ali Khamenei's $95 billion business empire, as well as on Iran's Islamic Revolutionary Guard Corps, which operates a vast network of companies and industries.

No wonder that European media outlets are referring to Iran as the "new El Dorado," the "chance of a century," and the "last untapped market."

Although the United States Congress will not vote on the accord until September, Europeans appear to be operating on the premise that Iran is now open for business.

Within days of the agreement's signing, the European Union approved the deal, and senior officials from Germany, France, Italy and the European Union rushed to Tehran to pursue business deals; leaders from Austria, Spain and Sweden are planning to lead trade missions to Iran in September and October.

On August 12, Switzerland — a neutral country that is not a member of the European Union — announced it would unilaterally lift sanctions on Iran effective immediately, presumably providing Tehran with access to technology and the Swiss banking system.

Analysts say the flurry of European activity implies that international sanctions on Iran are crumbling, and if Tehran violates its commitments under the nuclear deal, efforts to re-impose them are unlikely to succeed.

Saeed Ghasseminejad, an Iran analyst with the Washington-based Foundation for the Defense of Democracies, said:

"President Obama's promise about the snapback sanction has no truth in it. When international companies go to Iran and commit themselves and their shareholders to long-term multi-billion dollar investments, there will be no snapback sanction mechanism.
"It took the U.S. almost a decade to convince Europeans to leave Iran's market, as the European companies were deeply invested in the country. Those who promise an immediate return of sanctions in future are either naïve or they are not telling the truth."

In an interview with the New York Times, Philip Gordon, the Obama Administration's former coordinator for the Middle East who is now with the Council on Foreign Relations, admitted that American negotiators had deliberately left vague the procedures over sanctions snap-back, which means that if Iran fails to comply with the agreement, not all sanctions will necessarily be reapplied.

According to the Times, "The accord stipulates, for instance, that renewed sanctions 'would not apply with retroactive effect' to contracts signed before a potential violation is flagged. European companies and governments could argue that contracts signed now would be excluded from any future sanctions."

Addressing a meeting at Iran's Strategic Council on Foreign Relations on August 3, Iranian Foreign Minister Javad Zarif bragged that the international sanctions regime against the country has collapsed and will never again be re-imposed. He said:

"The structure of the sanctions that the US had built based on the UN Security Council's resolutions was destroyed and like the 1990s when no other country complied with the US sanctions against Iran, no one will accept the return of the sanctions in the future."

In an essay for Politico Europe, Middle East expert Ilan Berman pointed out that for Tehran, trading with Europe is actually the perfect self-defense, a virtual guarantee that it will not face military attack if it cheats on its obligations under the nuclear deal.

"The end result is a situation in which Europe's growing political and economic stake in the Islamic Republic virtually guarantees that Iran won't return to its old status as an international pariah, whether or not it ends up abiding by the terms of the JCPOA," Berman wrote. "The lesson, it seems, is that trading with Europe means never having to say you're sorry."

Following is a brief country-by-country round-up of key European trade delegations seeking to open business opportunities with Iran.

Germany. German Vice Chancellor Sigmar Gabriel was the first senior European official to visit Iran after the signing of the Vienna agreement. On July 19, Gabriel, who also serves as Economy Minister, led a delegation of high-ranking German business leaders to Iran to build bilateral trade relations. He said there was "great interest on the part of German industry in normalizing and strengthening economic relations with Iran."

The German Federation of Industries (Bundesverband der Deutschen Industrie, BDI) believes exports to Iran could rise to more than 10 billion euros ($10.9 billion) within three to four years, up from 2.4 billion euros in 2014.

Gabriel insisted that Iran must improve relations with Israel if it wants closer economic ties with Germany. "For Germany this much is clear: Anyone who wants sustainable relations with us cannot question Israel's right to exist," Gabriel said.

But Iranian officials flatly rejected Gabriel's plea. "We have totally different views from Germany on certain regional issues in the Middle East, and we have explicitly expressed our viewpoints in different negotiations," a foreign ministry spokesperson said.

France. Foreign Minister Laurent Fabius was the second senior European official to visit Iran after the nuclear deal was signed. Arriving in Tehran on July 29, Fabius proclaimed: "We are two great independent countries, two great civilizations. It is true that in recent years, for reasons that everyone knows, links have loosened, but now thanks to the nuclear deal, things are going to change."

Imports from Iran to France fell to just 62 million euros in 2013 from 1.77 billion in 2011. French exports to Iran in 2013 fell to 494 million euros from 1.66 billion euros in 2011, according to French foreign ministry estimates.

Fabius, who denied accusations that France's primary motivation in signing the Iran deal was to create business opportunities for French companies, also conveyed an invitation from French President François Hollande to Iranian President Hassan Rouhani to visit France in November.

Fabius' visit was marred by Iranian hardliners, who blame him for the spread of AIDS in the country. Some 300 Iranians were infected with tainted blood supplies that were exported to Iran in the mid-1980s, when Fabius was the Socialist prime minister, and when France's national blood transfusion center knowingly distributed HIV-contaminated blood products. Fabius was charged with manslaughter in 1999 but was later acquitted. Iranian protesters greeted Fabius with flyers depicting him with blood on his hands and the pledge: "We will not forgive or forget."

Representatives from France's largest employer federation, MEDEF, are due to visit Iran on September 27-29 to explore investment opportunities and re-establish commercial ties.

In February 2014, more than 100 French business leaders — with representatives from companies including Airbus, Alstom, Citroën, GDF Suez, Lafarge, Peugeot, Renault and Total — visited Iran "in an exploratory capacity." It was the largest of trade delegation of its kind from Europe since Iran signed an interim agreement in November 2013 promising to limit its nuclear program.

At the time, French Finance Minister Pierre Moscovici said the visit was intended to "convey the message that, if the situation improves, there will be significant commercial opportunities for France in Iran."

Foreign Minister Laurent Fabius says: "Trade is very important. It fosters growth. It's important for the Iranians, it's important for us," adding that regarding the current nuclear deal with Iran, "we did not take it for commercial reasons, but for strategic reasons..." Above, Iranian Foreign Minister Javad Zarif hugs Fabius at the close of nuclear talks in Geneva, Nov. 23, 2014. (Image source: ISNA)

Italy. Italian Foreign Minister Paolo Gentiloni and Economic Development Minister Federica Guidi led a high-level trade mission to Iran on August 4-6, aimed at opening export opportunities for Italian companies. According to forecasts by SACE, the Italian export credit company, Italian exports to Iran are expected to grow to €3.8 billion ($4.1 billion) in 2018, up from €1.2 billion currently.

Companies in the oil and gas industry and the machine tool industry, the two sectors most adversely affected by sanctions, are hoping to recapture market share lost due to the trade embargo. Companies active in the machine tools sector (which accounts for nearly 60% of current Italian exports to Iran) have seen their exports drop to €700 million from €1.3 billion during the past five years, according to SACE.

Gentiloni and Guidi met with Iranian Oil Minister Bijan Namdar Zanganeh on August 6. After the meeting, Zanganeh said that Iran had invited the Italian oil and gas giant Eni, as well as other Italian companies, to participate in projects in the Iranian oil industry.

On August 4, SACE, together with the Italian Ministry of Economic Development and Mediobanca, the leading investment bank in Italy, announced the finalization of a Memorandum of Understanding with the Iranian Ministry of Economy and Finance and the Central Bank of Iran, aimed at facilitating the development of future economic and trade relations between the two countries.

Under the agreement, "the parties will collaborate to evaluate short and medium-long term projects of mutual interest implying Italian export and investments and to identify local financial institutions that could benefit from credit lines provided by Mediobanca, and guaranteed by SACE and the Ministry of Economy and Finance of Iran, to support the financing and payment of such transactions."

Also on August 4, Finmeccanica, Italy's main industrial group, announced that it had signed a €500 million ($543 million) contract with Iran's Ghadir Investment Company to build a power plant in the country. Ghadir is 80% owned by the Islamic Revolutionary Guards' Corps (IGRC). The IRGC, through its elite Quds Force, is responsible for the deaths of at least 1,000 American troops in Iraq.

Austria. Austrian President Heinz Fischer is set to become the first European head of state to visit Iran since 2004 when he travels to Tehran on September 7-9. Fischer will be accompanied by Vice Chancellor and Economy Minister Reinhold Mitterlehner, Foreign Minister Sebastian Kurz, as well as a delegation of high-ranking Austrian business leaders. Mitterlehner said he hopes that Austrian exports to Iran will reach one billion euros per year by 2020, up from 232 million euros today.

On July 23-24, the Austrian Economic Chamber (Wirtschaftskammer Österreich, WKÖ) organized a major EU-Iran trade conference that was attended by nearly 400 Austrian and Iranian business leaders, including Iranian Industry Minister Mohammad Reza Nematzadeh.

According to Nematzadeh: "We are no longer interested in unidirectional importation of goods and machinery from Europe. We are looking for two-way trade, as well as cooperation in development, design, engineering and joint investment for production and export."

Not all Austrians are happy about the government's rush to embrace Iran. The Austrian branch of the activist group "Stop the Bomb" organized a protest outside the WKÖ's headquarters on July 23. In a statement, the group said:

"While the implementation of the nuclear deal with the Iranian has not even started and the sanctions on Iran are still in place, Iran trade lobbyists are set to host the 'EU-Iran-Conference' at the Austrian Economic Chamber WKO in Vienna. Among the participants are WKO-President Christoph Leitl and the Iranian Industry & Trade Minister Mohammad Reza Nematzadeh. 70 years after the Shoah, Austrian and German companies are in the first row to boost business ties with the anti-Semitic Iranian regime.
"This conference shows that billions of Euros are going to flow to the Iranian mullahs as a result of the Vienna agreement. This will enable the regime to sponsor its terror proxies like Hamas and Hezbollah and to enforce its aggressive expansion in the region in unprecedented ways. The terror against the Iranian population will not decrease, but increase. Already now more people have been executed under supposedly 'moderate' President Rouhani than under his predecessor Ahmadinejad.
"Conducting business with the Iranian regime means to finance the nuclear program, the annihilation threats against Israel, Holocaust denial, the export of Islamist terror and the oppression of the Iranian population."

Spain. Foreign Minister José Manuel García-Margallo, Industry, Energy and Tourism Minister José Manuel Soria and Development Minister Ana Pastor will lead a high-level trade delegation to Iran in early September. The objective is to open doors for Spanish companies in the energy, telecommunications and infrastructure sectors.

After the sanctions are lifted, Spain hopes to double its exports to Iran to 600 million euros, up from 300 million euros today, according to the Chamber of Commerce. The key sectors of interest for Spanish companies are petroleum, petro-chemical, mining, automobile, infrastructure and rail transport.

Despite the embargo, more than 350 mostly small- and medium-sized Spanish companies are currently active in Iran. On July 19, the newspaper El Mundo reported that more than a dozen Spanish companies sold so-called dual-use materials that could have been used to help Iran build weapons of mass destruction.

Since 2011, Spanish authorities have carried out nearly a dozen police operations aimed at disrupting illegal weapons sales to Iran. One such operation blew the lid off a scheme to sell nine helicopters to Iran. Another operation discovered that a company ostensibly dedicated to importing Persian rugs was trying to sell missile casings to the Iranian military.

A report published by Gatestone Institute in April 2014 found that in addition to Spain, companies or individuals in more than a dozen European countries — including Belgium, Britain, Finland, France, Germany, Hungary, Ireland, Italy, the Netherlands, Norway, Slovenia, Sweden and Switzerland — have been involved in illegal dual-use exports to Iran.

A senior French official interviewed by the Reuters news agency summed it up this way: "Everyone is looking at Iran with greed."
 

 

Soeren Kern is a Senior Fellow at the New York-based Gatestone Institute. He is also Senior Fellow for European Politics at the Madrid-based Grupo de Estudios Estratégicos / Strategic Studies Group. Follow him on Facebook and on Twitter.

Source:  http://www.gatestoneinstitute.org/6339/iran-deal-europeans-profit

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