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Europe deepens relations with Iran despite Trump's threats

European Investment Bank prepares guarantees for projects that do not find funding

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Europe deepens relations with Iran despite Trump's threats

Europe closes ties with Iran to ensure survival of nuclear agreement. In face of American threats to break iconic pact reached under administration of Barack Obama, European Union intensifies trade relations and paves way for investment. The European Investment Bank prepares guarantees for entrepreneurs who develop projects in second Middle East economy. A hundred companies will travel in May to Tehran, in hands of European Commission, to open markets in renewable energies.

The EU has become main beneficiary--also in large beneficiaries--of nuclear peace signed between world's major powers and Iran in 2015. While President Donald Trump fakes to retire if agreement is not renewed and Russia and China maintain more or less implicit support, European signatories of that framework (France, Germany, United Kingdom and whole Community Club) step on accelerator. The foreign ministers of se three countries and head of European diplomacy met last week with ir Iranian counterpart, on eve of US decision on continuation of lifting of sanctions that implied pact, to urge Trump to To keep it. At moment American leader has not reinstated diplomatic punishment linked to Iranian nuclear program, but fears are growing. And Europe is trying to get ready for that moment.

More information
  • The EU urges Washington to maintain nuclear pact with Iran
  • The United States and France disagree on Iran in Security Council

Iranian president Hasan Rohaní clings to this European support to strengn and stifle protests that have destabilized country in recent weeks. The nuclear agreement is, in his view, "a long-range victory for Iran" and " United States has failed to undermine it," he said on weekend to Iranian television.

The farewell to United Nations sanctions — and EU and United States separately — that since 2006 punished Iran for its nuclear proliferation program, now under international supervision, has shifted European relations with that Eastern neighbor. To turn ir backs on each or, two blocs have increased ir trade flows by 79% since suspension of sanctions prohibiting many of exchanges with that country (including energy). Oil production has returned to levels prior to diplomatic punishment and foreign investment takes off, with European companies like Total, Vodafone or Peugeot in front of that wave. The figures, however, are still far from reproducing pre-sanctions situation, when Europe was Iran's first trading partner. Today is fifth.

Energy is one of most traveled areas. Iran owns second world gas reserves and fourths of oil. But ir infrastructure is obsolete to exploit that potential and European firms try to do business by alleviating those shortcomings. The European Commissioner for Climate and Energy action, Miguel Arias Cañete, will travel in May with a hundred companies to Tehran to hold a forum on renewable energies, as community sources advance. Iran, which is practically zero, has set itself goal to obtain 5% of its energy from non-polluting sources in 2020. In addition to contracts seeking contracts for European firms, this effort benefits reduction of pollutant emissions to which almost entire planet has been compromised (with exception of United States, which withdrew after Trump's arrival) in agreement of Paris.

Resistance of banks

The Achilles ' heel of all this expansion in Iran is in financial sector's reluctance to favor it. In face of American suspicion, banks have not completely believed end of sanctions and hardly offer capital for projects in Persian country. As a sign that investment in Iran has become a policy of maximum interest to EU, European Investment Bank, little given to risk projects, is working on a guarantee program for European firms with energy plans , transport, construction and sanitation. Having that financial backing would unlock some projects now unviable because bank does not give m credit.

The European project also aims to anticipate a hypotical definitive withdrawal of nuclear pact from United States. That movement would trigger a imposition of sanctions for companies that trade with Iran. Europe is aware of detriments of this scenario, with its companies as a possible target of American retaliation. At this juncture, EU could apply two doctrines. The first is to try to achieve an exemption from sanctions for European companies, as was case with so-called Helms Burton Act, for which Washington punished companies that invest in Cuba. Europe, a major investor on island, managed, through diplomatic pressure, that US administration would rid European firms of that rule. The second would be to take European reprisals against that American measure. None of options seem simple, especially with Trump as interlocutor.

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