European firms cut back Iran presence

12 August 2018
Renewed US sanctions trigger suspension of operations or cutting back of presence in the Islamic Republic

Multiple European carmakers, shipping, railway and aviation firms are suspending or cutting back operations in Iran following the US’ re-imposition of general sanctions on the Islamic Republic, which could threaten their business in the US market.

German trucks manufacturer Daimler suspended its activities in the country "until further notice according to applicable sanctions".

The firm, whose divisions include Mercedes-Benz Cars, Daimler Trucks, and Mercedes-Benz Vans, among others, signed a letter of intent (LoI) in 2016 with Iran Khodro Diesel (IKD) and the Dubai-based Mammut Group for the local production of Mercedes-Benz trucks and powertrain components.

The LoI also included a provision for the establishment of a sales company for Mercedes-Benz trucks and components. Other plans include the return of Daimler as a shareholder in the former engine joint venture Iranian Diesel Manufacturing Company (Idem).

Germany’s Siemens, which in 2016 signed deals in the gas and rail sectors, said it could not take new business or orders in Iran as it intended to “respect export regulations, including US sanctions”.

Swedish truck manufacturer Scania, which was one of the first truck companies to return to Iran after the EU lifted sanctions in early 2016, is understood to have cancelled all orders that it could not deliver by mid-August.

French firm PSA, which sells Citroen, Peugeot and Opel, and holds an estimated 30 per cent market share in Iran, said it is suspending its investment in the country.

Total and Air Liquide, both of France, will cease operating in Iran too.

Shipping firms AP Moller-Maersk and CMA-CGM are also ceasing operations in the Islamic Republic.

Plane manufacturers Airbus and ATR delivered three and 13 new planes, respectively, to national carrier Iran Air between early 2017 and August this year. However, further deliveries are understood to be unlikely under the reinstated US sanctions.

Iran Air placed an order for 100 Airbus and 20 ATR aircraft in 2016. It also placed an order for 80 passenger jets with US-based Boeing, none of which was delivered.

Sources say UK-based British Airways and Germany’s Lufthansa, which restarted direct flights to Tehran in 2016, are also likely to stop them if they want to continue freely operating trans-atlantic flights.

Other European firms that are likely to be affected are hotel chains AccorHotels of France, and Melia Hotels of Spain.

German banks Helaba and the DZ Bank are also understood to have pulled out of Iran following the reinstatement of US sanctions.

Related: Emirates to maintain Iran flights status

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