Trump's casualties

VW may join other German companies scuttling out of Iran

US studying potential Iran sanction waivers: Pompeo
Many companies are now out of reach for Iranians. Source: AFP

Volkswagen seems to be the latest heavyweight German company pressured to withdraw its operations from Iran. The carmaker joins a slew of household names including BASF, Daimler, Deutsche Bahn, Deutsche Telekom, Munich Re and Siemens. They have left since the summer, and the retreat appears to be far from over.

Such news is not usually hard to confirm but is eagerly tweeted by Richard Grenell, the United States ambassador to Germany. He told the Jerusalem Post: “Volkswagen has told us they will comply with US sanctions on Iran. We are pleased with this decision because Iran diverts its economic resources away from its people to support the Assad regime and spread violence and instability across the globe.” Mr. Grenell told Bloomberg that after weeks of talks, he reached an agreement with VW for the company to abide by the US sanctions.

On Friday, reports emerged that VW has yet to withdraw from Iran. The company said it continues to abide by applicable laws and is monitoring the political situation. A spokesperson wrote that the carmaker is “considering possible implications in connection with the reimposition of US sanctions,” in a statement to Handelsblatt Global.

Nonetheless, Mr. Grenell is unstinting in his encouragement of German companies to stop their business with Iran ever since his first day in Berlin when he tweeted: “German companies doing business in Iran should wind down operations immediately”. Ever since, he has reported each company withdrawal with the hashtag #sanctionsareworking. Responses to those tweets have been mixed, from support to questioning of this policy.

The embassy in Berlin confirmed that ever since he took the post, Mr. Trump’s envoy has been talking to individual companies to persuade them to stop working with Tehran. “US Ambassador Grenell has been speaking to CEOs and industry leaders for quite some time urging them to comply with US sanctions,” Christina Higgins, an embassy spokeswoman, told AFP.

Smaller and mid-sized German companies are also leaving Iran in a hurry. For one, Herrenknecht, a maker of mechanized drilling technology, said it feared being blacklisted if it failed to stop doing business with the Persian Gulf country.

These firms are caving to the president’s hard line on Iran after withdrawing from the nuclear deal from 2015 in May this year. This summer, Donald Trump tweeted: “The Iran sanctions have officially been cast. These are the most biting sanctions ever imposed, and in November they ratchet up to yet another level. Anyone doing business with Iran will NOT be doing business with the United States. I am asking for WORLD PEACE, nothing less!“

German companies had waited long for the chance to return to Iran. After the nuclear deal was announced, they rushed in with high hopes. News emerged of contracts signed for hospitals, for railways and trains and car plants. That initial hope was slowed by a lack of clarity about financing via US banks. But businesses here continued, drawn by the prospect of an underdeveloped market with billion-dollar potential.

That market is not as promising as the cost of losing the US, however. As those companies now withdraw from Iran, it seems they haven’t yet made the sums they had hoped for.

Many had initially hoped for help from the European Union: in May, there was talk of a blocking statute that could protect companies. The EU continues to try to keep companies working in Iran and keep the nuclear deal alive but, thanks to efforts by the US, few firms still do business with Tehran. Others companies had applied for exemptions from the United States. When these were not forthcoming, they were forced to go.

Nor is Germany alone: From Maersk, the Danish shipping company, to Total and Peugeot of France, European companies are leaving in droves.

Another, tougher round of sanctions takes force on November 4, affecting oil and financial services. Expect more German dismay.

This story was updated on Friday to note that VW denied it had withdrawn from Iran.

Allison Williams is deputy editor of Handelsblatt Global. To contact the author: williams@handelsblatt.com

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