With the U.S. renewing sanctions on Iran after leaving the Joint Comprehensive Plan of Action (JCPOA) in May, European companies have faced the dilemma of continuing to do business with Iran or risking penalties from the United States. While European nations have vowed to keep the JCPOA alive, the reality is that they have limited options to protect companies from the consequences of sanctions.
Two german firms latest to pull out of Iran
Deutsche Bahn and Deutsche Telekom are both ending projects in Iran after the announcement of new sanctions. The threat of being barred from doing business with the United States was enough to send many companies in the other direction.
State-owned Deutsche Bahn was involved in two projects with Iran, via a subsidiary, but have indicated that both projects will be ended by September 2018.
“Due to the altered banking practice we have sought to bring the contract to an amicable and timely conclusion,” a spokeswoman said for the firm on Thursday.
The projects were a consulting contract for Iranian state railway RAI, which included helping to restructure the company, and a memorandum of understanding with Bonyad Eastern Railways, an Iranian rail operator, which was aimed at identifying the potential in rolling stock, as well as organizational issues.
New U.S. sanctions have already taken effect, and more are expected in the coming months. November 5th is the day that oil and gas sanctions will take effect, as the U.S. attempts to strangle the regime’s financial resources by cutting off its access to the energy marketplace.
The two firms are not the first to pull out of agreements with Iran. Oil major Total and carmakers PSA, Renault, and Daimler have all suspended agreements with Iran.
Telekom chooses to relationship with U.S.
For Deutsche Telekom, pulling its subsidiary out of Iran by terminating business with them in May 2018 was about more than just sanctions. The company also owns T-Mobile, which is based in the U.S. The company is looking to acquire Sprint Corp in a $26 billion deal, but that purchase is dependent on approval by regulators in the U.S.
It seems likely that the company chose to end its relationship with Iran in order to present the best case for the approval of its Sprint Corp purchase.
“Given the sensitivity in relations with Iran worldwide, Detecon ended its business in Iran with immediate effect in mid-May 2018,” said a spokesman for the company.
The company had been providing consulting services to telecommunications companies through its Detecon subsidiary.