World News

Europeans in Iran Bitterly Denounce the U.S. Over Its New Sanctions

Posted May 26, 2018 5:17 p.m. EDT

TEHRAN, Iran — After the landmark nuclear agreement of 2015, hundreds of European, Asian and even U.S. companies rushed to enter Iran’s largely untapped market of 80 million people, assured by the United States and the other signatories that their investments would be safe for at least a decade.

This month, after President Donald Trump unilaterally pulled the United States out of the agreement, the companies heard a strikingly different message: They have 180 days to leave Iran or face being barred from the U.S. market and being hit with multibillion-dollar fines and the arrests of their chief executives for disregarding U.S. sanctions.

In a speech Monday, Secretary of State Mike Pompeo vowed that the United States would destroy the Iranian economy with new unilateral measures that would be “the strongest sanctions in history.”

It is too early to say how many foreign companies ultimately will pull out of Iran in the face of the U.S. threats. The European Union has made promises to take steps to protect its companies.

But the new sanctions have undeniably complicated matters for foreign investors in Iran, particularly companies with global operations, leaving many European executives bitter.

“The message is ‘This is Rome, and Caesar has changed his mind. If we disobey, our villages will be burned to the ground,'” one said. Like every other person interviewed for this article, the executive would speak only anonymously, fearing the wrath of either Iranian or U.S. authorities.

It remains unclear just how much overall impact the new sanctions will have. While foreign investment in Iran has doubled since the 2015 deal, the actual increase, to $4 billion from $2 billion, is not terribly significant in a $428 billion economy.

“Punishing foreign companies seems to be more about exerting power than really hurting the Iranian economy,” said Saeed Laylaz, an Iranian economist. “What matters really is the oil. The presence of Europeans here, not that much yet.”

Nevertheless, the inroads made by Western businesses in the past three years are visible all along the clogged roads of the Iranian capital.

Bosch, the German home appliances producer, wants Iranians to buy their dishwashers, enormous billboards show. The logo of ABB Global, a Swedish-Swiss conglomerate active in everything from robotics to electric power, is plastered on the side of a building. Signs hawk Barbican nonalcoholic beer, from Saudi Arabia, Iran’s regional enemy.

Many of these ventures, particularly those involving high-profile companies with ties to or extensive operations in the United States, are now imperiled. Two major oil companies, Total of France and Eni of Italy, are leaving development projects. The Danish shipping companies TORM and Maersk will no longer call on Iranian ports. An Italian steel-maker, Danieli, which a year ago opened a big factory near Tehran, will have to sell its shares and pull out.

Procter & Gamble, the U.S. consumer goods giant, which was already selling products like Head and Shoulders shampoo and Braun shavers, is laying off all local staff, employees say, and heading for the exits.

But the decision is not so clear cut for numerous other companies, mostly European and Asian, that sell products that are not under sanctions — soft drinks, chocolate bars, clothes, medical equipment and medicine, for instance. Debenhams, the British department store, has franchises in Tehran, as does Adidas, the German sports apparel company. Peugeot and Renault of France sell cars here. Scania, the Swedish company, sells trucks and buses.

Then there are European and Asian consultants in Tehran and the rest of the country advising Iranian companies: importers of skin-care products, chefs working in high-end restaurants, professional football players and companies that have entered into joint ventures with Iranian partners.

The departure of the European and Asian companies undoubtedly will mean job losses for young Iranians. “I have a staff of 11 supermotivated women,” said one European executive who had built his office from scratch after his company returned to Iran in 2015. “It’s amazing to see how quickly employees here learn and adapt,” the executive said. “Now, I have to let them all go. It physically hurts me to even think of that.”

Local Iranian employers are feeling the effects, as well. “We lost 20 percent of our customers last week, and 60 percent have put their work in Iran temporarily on hold,” said Ben Karami of ICA, an advertising company based in Tehran. His customers used to be Procter & Gamble, the global beauty company Coty and others. “We will lose a lot of expats and a lot of know-how,” he added. “My employers, others where I was hoping to work, they might be leaving,” said Sanaz, 31, who is with a consumer products company. “Prices are high, most salaries — if you can find a job — low.”

Sanaz said she had no plans to join any protests against Iran’s leaders, as the Trump administration is hoping. “I was in protests in 2009,” she said. “That was a painful experience. If everyone comes out, I’ll join, but most probably I’ll tolerate the situation.”

Few European diplomats and analysts believe the new sanctions on Iran will have the impact that Pompeo, for one, seems to be hoping. And Washington is largely insulated from much of the impact.

“The Americans now want to destabilize Iran, but they won’t live with the consequences. We will,” said one European diplomat. He added that he doubted the sanctions would have much effect. But if they did destabilize the country, Europe would face the ramifications in migration and enhanced regional insecurity.

For now, the diplomat said, most European embassies are telling their companies to take their time. “We are telling them not to make any rash decisions and keep their business in place,” he said. “But, of course, they make their own decisions.”