French major enterprises have to abandon their commercial activities in Iran

by Hayat Gazzane, Le Figaro, Paris

cc. Under threat of penalties by the US sanction regime several French major enterprises have announced their intention to leave Iran or to put their plans on ice. Who does not comply with those sanctions has to expect severe penalties under American law. No financial institute and no enterprise of the world can dare to carry on commerce with a country which is hit by US sanctions. The reason:  All financial transactions with US dollars have to pass by a clearing house, even if the trading partners have nothing to do with the USA. As far as all dollar-tradings are concerned the central banks are reliant on the US clearing house Fedwire run and controlled by the US central bank FED. That way the USA have a powerful lever at their command. If a financial institute or an enterprise uses dollars for trading – ignoring the renewal of the sanctions against Iran – the USA can stop this trading.

The first wave will strike Iran on 6 August. That day the United States will bring back into use the economic sanctions against Tehran as direct consequence of their decision to cancel the nuclear agreement last May. These sanctions concern the civilian aviation and the automobile sector. A second wave will follow, this time in the sectors of energy, oil, gas, petrol chemistry and finances.

Donald Trump made his point several times: All enterprises who decide to continue their activities in the country after these dates will incur wrath of the US independent of their nationality. Freezing of assets, an entry in the black list of the SDN (Specially Designated Nationals) which forbids the access to the US market, financial penalties… The threats are too serious to be ignored by the enterprises. In France several of them, present in this promising market, therefore have decided to suspend their activities or even to draw back. An overall perspective:

Total

The petrol company belongs to the first that expressed their intention to cease their activities in Iran. Total has lost its hope to get an exception permit by the US authorities to continue with its activities in the gas field South Pars 11 (SP 11), which is considered to be the largest oil field of the world. In the year 2017 the French group as the first of the big oil conglomerations signed a contract in Iran after the signing of the nuclear agreement in 2015. Total will retreat now before the 4 November and will have to leave control over the project to its Chinese partner, the CNPC-group. This decision was quickly made because the United States strongly participate in Total. American banks are involved in nearly all of its financial operations, their American share-holders represent more than 30% of the interests and the US assets represent more than 10 billion dollar of the capital deployed by the group. “Without access to the American financial world you cannot operate an international enterprise in 130 countries. Therefore American law is applied and we have to leave Iran”, concluded the head of Total, Patrick Pouyanne, recently.

PSA

In June the automaker announced that it had initiated “the process of suspending activities” of its enterprises in Iran. With good reason: It is one of the French enterprises which is most heavily exposed to sanctions in this market. PSA, historically very present in Iran, in 2016 incorporated two joint-ventures with Iranian partners in the amount of several hundred million euro. In the year 2017 the group from Sochaux sold nearly 450,000 vehicles in this market, 12% of their worldwide turnover. But PSA whose associated company Faurecia generates 20% of its volume in the USA didn’t want to take any risk.

Engie

The company French energy giant has announced that it will cease its engineering-activities in Iran until 4 November. The group doesn’t own any infrastructure on-site but makes their teams work for Iranian clients. For Engie it is impossible to go on. “We have 180 days time to terminate our contracts which leads us to the next November, and certainly this will happen”, said Engie CEO Isabelle Kocher at the group’s general assembly in May.

CMA-CGM

The third biggest Container shipping company of the world has decided to cancel the commercial relations with Iran. “Our Chinese competitors are somewhat hesitant but they may have different relations to the Trump administration. But we adopt the guidelines” said Rudolphe Saadé, CEO of the group. In 2016 the CMA-CGM signed a memorandum of understanding with the Islamic Republic of Iran shipping lines for exchange or leasing of shipping space, for the operation of common shipping lines and for a cooperation in use of sea terminals. But the ship-owner has a strong presence in the USA. Therefore this decision.  Yet it should be pointed out that the number 1 of the branch, the Danish Moller-Maersk decided as well to cancel its activities in Iran. Just like the number 2, the Italian-Swiss MSC.

Alstom

The railway technology concern had great ambitions in Iran. 2016 it signed a memorandum of understanding with the IRDO (Iranian Industrial Development and Renewal Organisation) for the development of an “industrial cooperation” in the sector of city- and long-distance traffic. Concretely the French group should participate in a joint-venture with IRDO and the Iranian Rail Industries for the manufacture of tube carriages and local trains. Alstom should held 60% of the project. But the renewal of the American sanctions forces it to put all on ice. “Today we have not made a decision to invest. We wait for a clarification of the position of the signatories of the nuclear agreement”, a media spokesman committed to “Le Figaro” and added: “Alstom will respect international law in every case.”

Enterprises that (for the moment) continue their operations: Renault

The automaker is present in Iran since 2017 with a joint-venture. “We will not give up. Even if we have to strike our colours to a big extent we will still be present. We are convinced that […] this market will be opened again sometime. Then the fact that we have remained in Iran will surely be an advantage for us” said the CEO of Renault, Carlos Ghosn, in mid-June during the general assembly of the group. A position he had already formulated in “Le Figaro” on another occasion: “We from Renault want to keep up our long-term relations to Iran”, he declared.

Danone

The enterprise is represented with its four main activities in Iran: dairy products, water, baby nutrition and medical milk. “For dairy products we own a production facility. We work with the brand Danette. We also have a joint-venture for baby nutrition and water and we import medical nutrition” said a media spokesman towards “Le Figaro”. According to that Danone at the moment “reassesses its activities”, but is hardly worried, because the “agricultural and nutrition sector will not especially be hit by the American sanctions”.     •

Source: © “Le Figaro” from 23 July 2018, www.premium.lefigaro.fr/societes/2018/07/23/20005-20180723ARTFIG00050-ces-poids-lourds-francaisqui-s-eloignent-de-l-iran.php

(Translation Current Concerns)