The European Commission will launch the process of activating a law that bans European companies and courts from complying with US sanctions against Iran after Washington pulled out of the landmark 2015 nuclear deal.
Jean Claude Juncker, president of the European Commission, said on Thursday the commission has a “duty to protect European companies” from American sanctions.
“We now need to act, and this is why we are launching the process to activate the ‘blocking statute’ from 1996. We will do that tomorrow [Friday] morning at 10:30,” he told a news conference in the Bulgarian capital, Sofia, after a meeting of European Union leaders.
The EU wants to salvage the nuclear deal, and its blocking statute is the most powerful tool at its immediate disposal, as it means EU companies won’t have to comply with US sanctions.
It also does not recognise any court rulings that enforce American penalties.
Juncker’s announcement comes after US President Donald Trump withdrew Washington from the international deal with Iran, which placed limits on Tehran’s nuclear programme in exchange for sanctions relief.
But companies around the world now face a difficult choice as Washington has threatened to punish firms that violate US sanctions by dealing with Iran.
Hassan Rouhani, Iran’s president, said Tehran would remain committed to the deal, provided the deal’s remaining signatories ensure Iran was protected from sanctions.
Al Jazeera’s Paul Brennan, reporting from Sofia, said EU leaders showed unity at summit by pledging to stick by the Iran accord. “But they know their options are limited”, he said.
The blocking statute – a regulation created in 1996 to get around Washington’s trade embargo on Cuba – was “outdated”, Brennan said.
“The 1996 law was used to defend European businesses from US penalties for dealing with Cuba. But the US Congress has since passed new laws that make the EU statute outdated, such as threats to cut off companies’ access to the US banking system,” he said.
“The blocking mechanism will help small businesses that do not deal with the US, but the big multi-national companies, like Total and Maersk, are dealing in dollars and that means they will be subject to US sanctions if they continue to trade with Iran,” he said.
Earlier in the day, Valdis Dombrovskis, financial services commissioner, told European parliament that using the blocking statute to ban banks from following the US sanctions would be of limited use, given the global reach of finance.
“The EU blocking regulation could be of limited effectiveness there, given the international nature of banking system and especially the exposure of large systemic banks to US financial system and US dollar transactions,” he said.
Several European countries have quit business with Iran following the US exit.
Danish shipping giant Maersk Tankers also said Thursday it would cease its activities in Iran, while German insurer Allianz announced plans to wind down its business deals there.
Italian steel manufacturer Danieli announced it has halted work on finding financial coverage for orders it won in Iran worth 1.5 billion euros ($1.8bn).
The French energy giant, Total, warned on Wednesday it would pull out of a multibillion-dollar project to develop the vast South Pars gas field, which started in July 2017, unless it is granted a waiver by US authorities.
That led Bijan Zangeneh, Iran’s oil minister, to announce that Chinese state-owned oil company CNPC was ready to replace Total if it withdraws.
Separately, a British consortium, Pergas International, signed a preliminary deal with National Iranian South Oil Co to develop the Karanj oil field late on Wednesday, according to Iranian state TV.
The agreement is the first between Iran and a European company since the US exit from the nuclear accord.
Meanwhile, Russia moved to extend its economic influence in Iran.
In the Kazakh capital, Astana, the Russia-led Eurasian Economic Union trade bloc signed an interim trade deal with Iran that lowers tariffs on hundreds of goods.
The bloc, which also comprises Armenia, Belarus, Kazakhstan and Kyrgyzstan, plans to begin three years of talks with Iran that aim to create a free trade zone.
Total’s CEO said on Thursday he wouldn’t be surprised to see the price of a barrel of crude reach $100 later this year because of international political disputes.
“We are in a new world. We are in a world where geopolitics are dominating the market again,” Patrick Pouyanne said at an event at a Washington think-tank.
Market ripples from Venezuela’s economic distress and Trump’s decision to exit the Iran nuclear deal have oil prices surging. On Thursday, a barrel of North Sea Brent briefly passed $80 for the first time since November 2014.
“You have the announcement on Iran, which is pushing the price up,” said Pouyanne. “So I wouldn’t be surprised to see $100 per barrel in the coming months.”