U.S. multinational companies are bracing for a global business landscape fractured between firms willing and able to work with Iran and those who can’t.
And despite the backing of their governments, foreign companies may also have difficult decisions to make on their relationships with the Mideast theocracy after strong rhetoric from the White House, which decided this week to pull out of a nuclear pact that enabled trade with the country in return for concessions on nuclear-capability development.
Foreign subsidiaries of U.S. companies will no longer be able to engage with Iran directly or with other businesses that do work with the country after 90- and-180-day wind-down periods, the Trump administration said. The White House subsequently warned that the U.S might also penalize overseas companies that work with Iran, through so-called secondary sanctions.
Essentially, the business environment is returning to many of the conditions in effect before the Iran deal, said Foley & Lardner attorney Christopher Swift
“Suddenly these foreign subsidiaries of U.S. corporations become subject to primary sanctions again,” Swift, who previously worked for the Treasury Department’s Office of Foreign Assets Control, said in a recent interview. “And everybody else in Europe is going to be subject to secondary sanctions again.”
The situation is complicated further by announcements from European and Asian officials that their governments will uphold the nuclear deal, putting them at odds with the Trump administration and raising questions about the operations of U.S.-based multinational businesses in those countries.
“Companies are going to find themselves in a very, very difficult position where their own domestic countries and most of Europe is encouraging them to continue to help rebuild the Iranian economy and trying to do that in an environment where there’s the risk of secondary sanctions for doing so,” said Ryan Fayhee, a former Department of Justice official and current partner at law firm Hughes Hubbard & Reed.
Some legal experts say countries such as France might impose so-called blocking statutes to prevent any company from ending contracts with Iran based upon U.S. secondary sanctions.
Prior to the deal, countries took a unified stance against doing business with Iran, and the coalition helped bring Tehran to the negotiating table.
Trump’s decision to act unilaterally creates complications that didn’t exist then, and foreign automotive manufacturers and the energy sector, in particular, might be squeezed as a result.
France-based oil and gas company Total SA, for example, signed a billion-dollar deal with Iran in 2017 to develop gas fields. A spokesperson didn’t respond to a query on the contract’s future.
Oilfield services giant Schlumberger didn’t respond to a request for comment on a separate 2016 Iranian deal.
