Trump triumphant German firms bend to US sanctions, cutting ties to Iran

Even as European leaders oppose the measure, the likes of Daimler and Siemens are scrambling to comply rather than risk disruption of their US business.
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How quickly they caved — Daimler, Volkswagen, Siemens, Bayer and many others. Despite all the brave words of defiance when the US announced renewed sanctions against Iran, German firms are suspending business with the Middle Eastern country now that they are in place for fear of President Donald Trump’s wrath.

“Anyone doing business with Iran will NOT be doing business with the United States,” the US president tweeted unequivocally on Tuesday.

Whatever German executives might think about the wisdom or legality of the sanctions, the US market is simply too important to risk disruptions. The Berlin government has pledged to find ways to protect German companies from secondary sanctions, but they seem to prefer the safer path of not flouting sanctions to begin with.

Firms adapt to 'changed multilateral framework'


, the maker of Mercedes-Benz luxury vehicles, announced as soon as the sanctions became effective on Tuesday that it has suspended its "activities in Iran in accordance with applicable sanctions until further notice.”

Oil and gas producer Wintershall said it will close down its office in Tehran. VW warned that the truck and bus sales of its Scania unit in Iran could be completely lost. Siemens said it is taking measures to make its business activities conform to the “changed multilateral framework.” Chemicals giant Bayer and consumer goods producer Henkel said they are reviewing their Iran business.

The US said it would renew sanctions when it unilaterally pulled out of the Iran nuclear accord in May. European allies, including Germany, opposed the move and said they will uphold their end of the agreement.

Mr. Trump considered the accord reached by his predecessor, Barack Obama, to lift sanctions in exchange for Iran suspending development of nuclear weapons to be a bad deal, too full of holes to be effective. European countries fear that abandoning the accord will lead to accelerated development of nuclear weapons in Iran.

Europe's aspirations vs reality

On the face of it, the US threat puts German firms in a quandary. “Adherence to US sanctions can conflict with EU law, which can be an offense in Germany that carries a fine of up to €500,000,” said Constantin Lauterwein of the law firm Hengeler Mueller. “At the same time, ignoring US sanctions can be a major disadvantage, especially in terms of access to the US market.”

The showdown over sanctions demonstrates once again the economic clout of the United States, severely restricting the ability of Germany or any other European country to follow a different policy. The gap between Europe’s aspirations as a wannabe great power and its impotence in the face of US power is as wide as ever.

The so-called “blocking statute” put into place by the European Union is not much help. The measure “allows EU operators to recover damages arising from US extraterritorial sanctions from the persons causing them and nullifies the effect in the EU of any foreign court rulings based on them,” the European Commission said in a press release Monday. It also forbids EU persons from complying with those sanctions.

However, Mr. Lautwein said it isn’t likely to bring a wave of lawsuits. Who is the person causing the losses – a government, a bank, a company? How do you quantify the damage?

Washington has promised further sanctions for November, directly targeting Iran’s oil and gas exports, if Tehran does not meet its demands regarding uranium enrichment and supporting terror. Then as now, US officials will not be paying much attention to the damage inflicted on European companies through the sanctions.

Several Handelsblatt reporters contributed to this story. Darrell Delamaide is a writer and editor for Handelsblatt Global in Washington, DC. To contact the author: [email protected]