LCCC ENGLISH DAILY NEWS BULLETIN
August 09/2018
Compiled & Prepared by: Elias Bejjani

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How to Make the Global Economy Work for Everyone
Lawrence H. Summers/Bloomberg/August 08/18
Since the end of World War II, a broad consensus in support of global economic integration as a force for peace and prosperity has been a pillar of the international order. Since the fall of the Berlin Wall a generation ago, the power of markets in promoting economic progress has been universally recognized. From global trade agreements to the European Union project; from the Bretton Woods institutions to the removal of pervasive capital controls; from expanded foreign direct investment to increased flows of peoples across borders, the direction has been clear. Driven by domestic economic progress, by integrative technologies such as container shipping and the internet, and by legislative changes within and between nations, the world has grown smaller and more closely connected.
This has proved more successful than could reasonably have been hoped. We have not seen a war between leading powers. Global living standards have risen faster than at any point in history. And material progress has coincided with even more rapid progress in combating hunger, empowering women, promoting literacy and extending life. Every single day since 1990 there were an average of 108,000 fewer people in extreme poverty. Since the beginning of the 21st century, global life expectancy has increased by more than four months a year. A world that will have more smartphones than adults within a few years is a world in which more is possible for more people than ever before.
Yet a backlash against the current paradigm of global integration is reshaping politics and economic policy in a way that may plague us for years. The momentum toward global economic integration was stopped when the US repudiated the Trans-Pacific Partnership. As I write this, worries of a trade war between the US, China and other countries have materialized, leaving a wide range of industries and countries anticipating substantial losses. History with respect to the result of such trade wars — most notably the Smoot-Hawley Tariff Act — is not encouraging. The International Monetary Fund estimates that rising trade tensions between the US and the rest of the world could cost the global economy 0.5 percent of gross domestic product, or $430 billion, by 2020.
The shift away from openness extends to immigration and capital flows as well. The EU, notable for its commitment to the free movement of people, is shifting toward much tougher immigration policies. New immigration policies in the US have turned police officers into immigration-enforcement agents and hurt business growth. Restrictions on foreign investment have been increasingly common as the US has taken to blocking Chinese investments, China has set unfair terms for US companies wishing to invest there, and Europe has increasingly favored domestic companies over foreign competitors.
The backlash against global integration has many sources. Some of it reflects broader economic frustrations associated with slower growth and rising inequality. Some reflects the difficulties of maintaining harmony within multiethnic societies. Surely the speed and scale of China’s ascent has contributed. But what is most important is the growing suspicion on the part of electorates that globalization is an elite project that primarily benefits elites. Somehow branches for financial institutions in foreign countries seem to be a higher priority than protections for displaced workers. And protection of the intellectual property of global corporations is a more focal concern than preventing unfair competition from foreign companies that escape regulation.
This must change if global integration is to maintain its political foundation in the world’s rich countries. Political leaders must connect global integration with tangible benefits for middle-class citizens, must show that international cooperation helps to prevent exploitation of ordinary citizens by elites, and must assure that adequate social protections are in place so that those who must adjust to economic change are protected.
In “The Economic Consequences of the Peace,” written after World War I, John Maynard Keynes asserted the primacy of economics, observing that “the perils of the future lie not in frontiers and sovereignties but in food, coal and transport.” His call for strong policies directed at promoting mutual prosperity and cooperation went unheeded, with catastrophic consequences. The understanding of this grim experience after World War II set the stage for the best 70 years mankind has enjoyed. Will the US and the global community turn away from the paradigm of global integration that has worked so well and back to the narrow nationalism that Keynes so powerfully and rightfully decried? Or will they find ways of promoting global integration that benefit all citizens everywhere? These might include major cooperative efforts to prevent global corporations from avoiding taxes, crackdowns on regulatory arbitrage, and stronger domestic programs to cushion the impact of structural changes on individual workers. These are the questions that may determine the history of the 21st century.

Analysis/Iran's Economy Isn't Ready for Sanctions' Impact, but Tehran Won't Fold Over Nuclear Issue
زيفي بارئيل من الهآررتس: الإقتصاد الإيراني ليس مستعداً لمواجهة مفاعيل العقوبات ولكن طهران لن تقلل من أهمية الملف النووي
http://eliasbejjaninews.com/archives/66611/zvi-barel-haaretz-irans-economy-isnt-ready-for-sanctions-impact-but-tehran-wont-fold-over-nuclear-issue-%d8%b2%d9%8a%d9%81%d9%8a-%d8%a8%d8%a7%d8%b1%d8%a6%d9%8a%d9%84-%d9%85%d9%86-%d8%a7/
Zvi Bar'el/Haaretz/August 08/18
U.S. sanctions won't necessarily change Iran's stance, and protests over staggering inflation still aren't threatening the regime. Nonetheless, there's a chance for a new negotiation.
Preparations in Iran for the first round of U.S. sanctions have not yet produced an impressive plan of action. President Hassan Rohani’s statements about his willingness to take diplomatic steps but not when Iran is under sanctions is not a very creative response given the scope of the threat on Iran’s doorstep. Equally unimpressive is the warning of Qassem Soleimani, head of the Iranian Revolutionary Guards’ Quds force, to the effect that “Iran is prepared to stand up to the United States.”
It’s true that Iran has mobilized support from Russia, China and Turkey, which continue to invest or at least have pledged to invest tens of billions mainly in oil exploration. But these countries will also be faced with a decision ahead of November 4, the date on which sanctions go into effect against oil imports from Iran. Iran’s foreign currency reserves, estimated at more than $130 billion, and the National Development Fund of Iran, which has a few dozen billion dollars more, give it some breathing room. But these cannot replace significant economic reform to stabilize the riyal, which this week reached a historic low of 120,000 riyals to the dollar.
Changes that Rohani made in his administration, such as firing Central Bank Governor Valiollah Seif, who was in charge of regulating the capital market, and the departure of Mohammad Bagher Nobakht, the head of Iran’s budget and planning organization, were intended mainly to show that Rohani is “listening” to the outcry from the street and responding to political pressure. This month he will have to respond in parliament to pointed questions about the way Iran’s economy is being handled and about the failure of the nuclear agreement. This will be the opportunity for Rohani’s rivals to sling accusations at him and highlight his failures, but the members of parliament have no better idea how to extricate Iran from its economic crisis.
The Iranian government’s only move so far is the decision to establish a secondary foreign currency market in which the value of the riyal will be set by its free-market price, without government intervention. Travelers abroad will no longer be able to buy dollars at the official rate of 42,000 riyals per dollar, and money changers can return to work and sell dollars at the secondary market rate but no more than $10,000 per person.
These measures will not be enough to appease the protesters, who are facing dizzying price hikes due to surging inflation, unemployment and shortage of drinking water. So far, the protests are sporadic and local. Slogans against the government and the supreme leader Ali Khamenei can be heard alongside denunciations of Iran’s involvement in the wars in Syria and Yemen. But this has so far failed to create the critical mass of opposition that would threaten the survival of the regime.
The new sanctions are supposedly intended to get Iran to agree to negotiate with the United States over a new nuclear agreement that will include Iran giving up its ballistic missile development and ending its involvement in conflicts in the region. But sanctions are the relatively easy part of the battle against Iran. It is much harder to ensure that the sanctions will change Iranian policy.
The American concept rests on the assumption of a direct connection between the penalties imposed and the outcome. But Iran withstood sanctions as far back as the 1950s, when the British imposed a full closure following nationalization of its oil by Prime Minister Mohammad Mosaddegh. Since the Islamic Revolution, Iran has been under ongoing sanctions, American and international, which until 2013 did not lead to significant negotiations on freezing Tehran’s nuclear program. Only after Rohani came to power did Khamenei give the green light to enter the historic negotiations that led to the nuclear agreement.
A decade before, in 2003, Iran proposed embarking on negotiations with the United States over the nuclear program and even halted the program in exchange for the lifting of sanctions. But then it encountered the solid wall put up by President George Bush, who was on the verge of war against Iraq. Bush’s disregard for Iran’s proposal led to the renewal of the nuclear program and the refuting of the theory that Iran would agree to freeze the program out of fear of an American attack in the wake of the U.S. war against Iraq.
Heavier sanctions on Iran over the past decade were only one component in the development of its economic crisis. Many other factors led to the crisis, among them: a lack of rational economic policy during the term of President Mahmoud Ahmadinejad, deep-seated corruption that wasted tens of billions of dollars, the lack of practicable five-year development plans, generous government subsidies to the people, and the takeover by the Revolutionary Guards of more than half of Iran’s economy, random management of the oil sector, and political power struggles.
According to leading Iranian economists and senior officials, Iran could have overcome the crisis more easily, even under sanctions, if it had implemented proper economic reforms. From time to time these economists have made recommendations to the supreme leadership but they were rejected by those with vested interests who funneled millions into their own pockets from the sanctions, often by smuggling oil and other products. Some of those responsible were later put on trial, but the heavy damage was already done. And after most of the sanctions were lifted in the wake of the nuclear agreement, control over foreign investment contracts by those with influence did not disappear. The Revolutionary Guards continued to hold on to most of the deals, as did those in Khamenei’s inner circle, which is managed like an economic mafia led by his son, Mojtaba Khamenei.
Now too, under the new sanctions, Iran’s economic survival depends on loosening the economic and political systems. But if the past is any indication, it seems that the many layers of vested interests and the tight pyramid of control will lead to continued profit-seeking rather than implementation of real reforms.
This structure could, as in the past, cause the sanctions, and President Donald Trump’s punishment strategy to fail. In addition to political and economic failures, the sanctions could play into the hands of the regime as it attempts to crush all protest and rebellion.
The Iranian regime, which has adopted the slogan of “revolutionary economics,” can be expected to mobilize the public in its efforts to resist the enemy’s attempt to bring down the regime, thus rendering opposition to the regime as akin to treason.
At the same time, those in favor of sanctions against Iran cannot ignore the fact that Tehran has decided to stick to the agreement and not withdraw from it. Rohani’s willingness to continue diplomatic efforts – if the United States would lift the sanctions and return to the nuclear accord – shows that Iran does not consider the agreement a one-time event.
The agreement gave Iran international recognition without it having to build even one nuclear bomb, but it neutralized the significant diplomatic threat it wielded, and confronted Tehran with a complex dilemma.
A decision by Iran to renew its nuclear program will unite the European Union with the United States, and could mean the loss of support by Russia and China. On the other hand, a decision not to renew and maintain the program reveals its most important negotiating hand right away. This dilemma provides a new opportunity for negotiations with Iran – not instead of the nuclear agreement, but in addition to it. After all, the imposition of sanctions on Iran indicates that it is considered a rational country that understands heavy-handed hints, the kind of country with which binding agreements can be signed.

Exclusive - Iran and Circumventing the Sanctions
Hussam Itani/Asharq Al-Awsat/August 08/18
The re-imposed American sanctions against Iran demand a closer examination on the extent in which they may lead to the collapse of its ruling regime or eruption of mass protests that may overthrow it.
In this regard, one can make five observations on the current available factors:
1- The losers: Recent experience has demonstrated that those most harmed from sanctions are often regular citizens. Targeted regimes quickly find means to turn the suffering of the people into tools to bolster their internal control and oppress opponents. They will find ways to distract the people with tedious procedures to go about their daily lives, such as securing food baskets and completing transactions that have been made complicated by the sanctions.
The Saddam Hussein regime in Iraq was a prime example of how to exploit sanctions that were imposed after the invasion of Kuwait. On the one hand, he used the sanctions to cow the people into submission and, on the other, waged a media propaganda war that portrayed him as the victim.
Iranian officials have likely garnered enough experience from recent sanctions experiences in 2012 and 2015 to handle the re-imposed US sanctions. The previous experiences had made the lives of Iranian citizens difficult, but presented a golden opportunity for the ruling political class to reap wealth from loopholes in the sanctions.
2- Goals: Those behind the sanctions are seeking to present insurmountable obstacles before the targeted regime to force it to alter its stances and policies and return to the negotiations table. They are also banking on mounting challenges, sparked by the sanctions, that would culminate in popular anger that would eventually overthrow the regime should it remain unyielding in its stances.
Those drafting these strategies, however, often come from countries that enjoy a rich democratic legacy and that actually listen to the people. This is not the case in semi-totalitarian regimes, such as the one in Iran. Iran’s regime is based on revolutionary and religious (Wilayet al-Faqih) teachings, not rules generated from elections and the voice of the people. It is common knowledge that the regime did not hesitate in 2009 to openly forge electoral results when the original ones went against the ruling class.
3- Internal resistance: Iranian supreme leader Ali Khamenei still has many cards up his sleeve to confront the sanctions and he will turn to them when the need arises. Just two days ago, he refused to lift the house arrest against opposition figures Mir Hossein Mousavi and Mehdi Karroubi. He also sought the failure of mediations to appease internal anger against the government. This was interpreted as a sign that Khamenei and his allies have chosen confrontation, rather than appeasement, with local rivals. This was also seen as a message to recent popular protests that the regime will not veer off its current course. The most they can expect is some short-term cures, such as replacing the central bank governor or other officials.
One must take into account that the regime still enjoys popular backing, especially among the poor in the countryside. In 2009, it succeeded in convincing them that the majority of those rejecting the electoral results were “western agents”. The regime has not hidden the fact that it is ready to lead matters towards a wider bloody confrontation if the protests became more organized and yielded a clear leadership.
4- The outside: The international community had rallied against Iraq when the sanctions were imposed against it. In stark contrast, the United States is alone today in waging its campaign against Iran. Despite the massive clout of the American economic and political machine, which will, one way or another, force western companies to accept the sanctions, major players have objected over how the US approach has encroached on their interests. So far, China, Russia and Turkey have refused to comply with the sanctions. There is no doubt that others will follow. They will seek ways to continue cooperation with Iran to achieve financial and political gains on the international scene.
This does not mean that the sanctions will not leave their mark in Iran, because they will. It means that Tehran will find someone to thrown it a lifeline.
5- Ready to pay the price: Much has been written about Iranian pragmatism and how it can withdraw at the very last minute to avoid a crushing military blow. This was demonstrated in how Iranian forces and their allies withdrew 85 kms away from Syria’s Golan Heights out of fear of an imminent Israeli strike.
Iran can use this approach in highlighting potential American losses should tensions between it and Washington escalate towards a military confrontation. Iran may have contained the tensions sparked by President Hassan Rouhani’s threat to shut the Hormuz Strait, but it pushed its forces to stage major military drills near the waterway. This was seen as a message that it was ready for a military confrontation, which would likely not sit well with an American public that has not yet recovered from the shocks of the US invasions of Afghanistan and Iraq. Given the above, it seems necessary to avoid making conclusive judgments on the re-imposition of sanctions and instead adopt a calmer reading of the developments, despite the backdrop of heated rhetoric.

Yazidi Slavery, Child Trafficking, Death Threats to Journalist: Should Turkey Remain in NATO?
Uzay Bulut/Gatestone Institute/August 08/18
https://www.gatestoneinstitute.org/12816/turkey-child-trafficking-slavery
Yazidis are still being enslaved and sold by ISIS, with Turkish involvement, while the life of the journalist who exposed the crime is threatened.
Reuniting the kidnapped Yazidis with their families and bringing the perpetrators to justice should be a priority of civilized governments worldwide, not only to help stop the persecution and enslavement of Yazidis, but also to defeat jihad.
The question is: Should Turkey, with the path it is on, even remain a member of NATO?
August 3 marked the fourth anniversary of the ISIS invasion of Sinjar, Iraq and the start of the Yazidi genocide. Since that date in 2014, approximately 3,100 Yazidis either have been executed or died of dehydration and starvation, according to the organization Yazda. At least 6,800 women and children were kidnapped by ISIS terrorists and subjected to sexual and physical abuse, captives were forced to convert to Islam, and young boys were separated from their families and forced to become child soldiers, according to a report entitled "Working Against the Clock: Documenting Mass Graves of Yazidis Killed by the Islamic State." Moreover, 3,000 Yazidi women and girls are believed to remain in ISIS captivity, but their whereabouts are unknown.
One Yazidi child recently sold in Ankara, Turkey, and then freed through the mediation efforts of Yazidi and humanitarian-aid organizations, according to a report by Hale Gönültaş, a journalist with the Turkish news website Gazete Duvar. On July 30, three days after Gönültaş's article appeared, she received a death threat on her mobile phone from a Turkish-speaking man, who told her that he knew her home address, and then shouted, "Jihad will come to this land. Watch your step!"
This is not the first time that Gönültaş has been threatened for writing about ISIS atrocities. In May 2017, she received similar telephone threats after posting two articles: "200,000 children in ISIS camps," and "ISIS holds 600 children from Turkey."
In addition, a video of Turkish-speaking children receiving military training from ISIS was sent to her email address. In the video, in which one of them is seen cutting off someone's head with a knife, the children are saying, "We are here for jihad."
Gönültaş, whose lawyer has filed a criminal complaint about the threats, told Gatestone:
"A child has been sold, and this is a crime against humanity; and I do not think the sole perpetrator is ISIS. There is a larger organized network involved in this. My report has further exposed this reality. I have been a journalist for 22 years and have been subjected to similar threats many times. I do not live in fear or worry. I will continue reporting facts."
In her article, Gönültaş conducted an interview with Azad Barış, founding president of the Yazidi Cultural Foundation, who said that a Yazidi girl, who was taken captive during the ISIS invasion of Sinjar in 2014, was sold for a fee determined by ISIS through "intermediaries" in Ankara:
"To restore the child to liberty, the Yazidi community and humanitarian aid organizations -- the 'reliable intermediaries' who stepped in to save the child -- contacted the intermediaries who acted on behalf of ISIS.... The child was then taken out of Turkey quickly with the help of international organizations and reunited with her family. As far as I know, Turkish security forces were not informed of the incident. The priority was the life of the child and to take her to safety swiftly. And the child did get safely reunited with her family."
Barış also said that Yazidi women were exposed to mass rapes at the hands of ISIS terrorists who called them "spoils of war" and claimed that it was "religiously permissible" ("jaiz" in Arabic) to rape them:
"Women were taken from one cell house to another and were exposed to the same sexual and psychological torture in every house. According to witness statements, women were mass raped by ISIS militants three times every day. Dozens of women ended their lives by noosing and strangling themselves with their headscarves.
"Slave markets have been formed on an internet platform known as the 'deep web.' Not only women but also children are sold on auctions on the deep web... When the selling is completed on the internet, the intermediaries of those buying the women and the intermediaries of ISIS meet at a place considered 'safe' by both parties. Women and children are delivered to their buyers. Some Yazidi families have liberated their wives, children and relatives through the help of the reliable persons that joined in the auctions on the deep web on their behalf. The price for liberating the women and children ranges between 5,000 and 25,000 euros... Our missing people are still largely held by ISIS. Wherever ISIS is, and wherever they are effective, the women and children are mostly there. But selling women is not heard of very often anymore."
Also according to Barış, the second largest Yazidi group held captive by ISIS are boys under the age of nine:
"[they] receive jihadist education at the hands of ISIS; are brainwashed, and have been made to change their religion. Each of them is raised as a jihadist. But we are not fully informed of the exact number and whereabouts of our kidnapped children."
This is not the first time that the sale of Yazidis in Turkey was reported in the media. In 2015, the German public television station ARD produced footage documenting the slave trade being conducted by ISIS through a liaison office in the province of Gaziantep in southeast Turkey, near the Syrian border.
In 2016, the Turkish daily Hürriyet reported that the Gaziantep police had raided the Gaziantep office and found $370,000, many foreign (non-Turkish) passports, and 1,768 pages of Arabic-language receipts that demonstrate the transfer of millions of dollars between Syria and Turkey.
Six Syrians were indicted in Turkey for their involvement, but all were acquitted due to a "lack of evidence." No member of the Gaziantep Bar Association, which had filed the criminal complaint against them, was invited to attend the hearings. According to Mehmet Yalçınkaya, a lawyer and member of the Gaziantep Bar Association:
"The court, without looking into the documents found by police, made the decision to acquit... We learned of the decision to acquit by coincidence. That the trial ended in only 16 days and 1,768 pages of documents were submitted to the court after the decision to acquit shows that it was not an effective trial."
Addressing the US House of Representatives Foreign Affairs Committee on December 9, 2015, Mirza Ismail, founder and chairman of the Yezidi Human Rights Organization-International, said, in part:
"We Yezidis are desperate for your immediate help and support. During our six-thousand-year history, Yezidis have faced 74 genocides in the Middle East, including the ongoing genocide. Why? Simply because we are not Muslims. We are an ancient and proud people from the heart of Mesopotamia, the birth place of civilization and the birth place of many of the world's religions. And here we are today, in 2015, on the verge of annihilation. In response to our suffering around the World there is profound, obscene silence. We Yezidis are considered 'Infidels' in the eyes of Muslims, and so they are encouraged to kill, rape, enslave, and convert us."
"I am pleading with each and every one of you in the name of humanity to lend us your support at this crucial time to save the indigenous and peaceful peoples of the Middle East."
Three years after this impassioned plea, Yazidis are still being enslaved and sold by ISIS, with Turkish involvement, while the life of the journalist who exposed the crime is threatened. Reuniting the kidnapped Yazidis with their families and bringing the perpetrators to justice should be a priority of civilized governments worldwide, not only to help stop the persecution and enslavement of Yazidis, but also to defeat jihad.
The question is whether NATO member Turkey is a part of the solution or part of the problem. Should Turkey, with the path it is on, be allowed even to remain a member of NATO?
*Uzay Bulut, a journalist from Turkey, is a Distinguished Senior Fellow at Gatestone Institute. She is currently based in Washington D.C.
© 2018 Gatestone Institute. All rights reserved. The articles printed here do not necessarily reflect the views of the Editors or of Gatestone Institute. No part of the Gatestone website or any of its contents may be reproduced, copied or modified, without the prior written consent of Gatestone Institute.

EU Unable to Neutralize US Sanctions against Iran
Soeren Kern/Gatestone Institute/August 08/18
https://www.gatestoneinstitute.org/12815/iran-sanctions-european-union
"Anyone doing business with Iran will NOT be doing business with the United States." — US President Donald J. Trump.
"The EU is demanding that its largest corporations risk the entire cake for a few more crumbs." — Samuel Jackisch, Brussels correspondent for German public broadcaster ARD.
"The fines are in the multibillions these days so it's just not worth the risk for a small piece of business and maybe pleasing a European government." — Investment banker quoted by Reuters.
The European Union has announced a new regulation aimed at shielding European companies from the impact of US sanctions on Iran. The measure, which has been greeted with skepticism by the European business media, is unlikely to succeed: it expects European companies to risk their business interests in the US market for interests in the much smaller Iranian market.
The so-called "Blocking Statute" entered into effect on August 7, the same day that the first round of US sanctions on Iran officially snapped back into place. Those sanctions target Iran's purchases of US dollars — the main currency for international financial transactions and oil purchases — as well as the auto, civil aviation, coal, industrial software and metals sectors. A second, much stronger round of sanctions targeting Iran's oil exports, takes effect on November 5.
The action follows up on President Donald J. Trump's decision on May 8 to withdraw from the 2015 Joint Comprehensive Plan of Action (JCPOA, also known as the Iran Nuclear Deal) negotiated by the Obama administration, which lifted sanctions on Iran in exchange for a freeze on its nuclear program.
The Trump administration said that the deal negotiated by the Obama administration did not go far enough to curtail Iran's nuclear weapons program, or its ballistic missile program, or its malign behavior in the Middle East and elsewhere.
The reimposed US sanctions apply not only to American citizens and companies, but also to non-American individuals and companies. In a legal concept known as extraterritoriality, any company based outside of the United States must comply with American sanctions if it uses dollars for its transactions, has a subsidiary in America or is controlled by Americans.
In an August 6 statement, Trump said:
The United States is fully committed to enforcing all of our sanctions, and we will work closely with nations conducting business with Iran to ensure complete compliance. Individuals or entities that fail to wind down activities with Iran risk severe consequences."
In an August 7 tweet, Trump repeated that threat:
"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."
In a joint statement, EU foreign policy chief Federica Mogherini and the foreign ministers of France, Germany and the UK openly admitted that for the EU the Iran deal is all about money and vowed to protect European companies from US penalties:
"We are determined to protect European economic operators engaged in legitimate business with Iran, in accordance with EU law and with UN Security Council resolution 2231. This is why the European Union's updated Blocking Statute enters into force on 7 August to protect EU companies doing legitimate business with Iran from the impact of US extra-territorial sanctions.
"The remaining parties to the JCPOA have committed to work on, inter alia, the preservation and maintenance of effective financial channels with Iran, and the continuation of Iran's export of oil and gas. On these, as on other topics, our work continues, including with third countries [China and Russia] interested in supporting the JCPOA and maintaining economic relations with Iran."
In a joint statement, EU foreign policy chief Federica Mogherini (pictured) and the foreign ministers of France, Germany and the UK openly admitted that for the EU the Iran nuclear deal is all about money and vowed to protect European companies from US penalties.
The Blocking Statute, originally adopted by the EU in 1996 to help European companies avoid US sanctions on Cuba, was updated in June 2018 to include sanctions the US is re-imposing on Iran. The document, riddled with EU jargon, states:
"The Blocking Statute allows EU [economic] operators to recover damages arising from the extra-territorial sanctions within its scope from the persons causing them and nullifies the effect in the EU of any foreign court rulings based on them. It also forbids EU persons from complying with those sanctions, unless exceptionally authorized to do so by the [European] Commission in case non-compliance seriously damages their interests or the interests of the Union."
In other words, the EU is prohibiting EU citizens and companies from complying with US sanctions and is authorizing EU companies hit by US sanctions to sue the US government for compensation in European courts.
In addition, European companies that do pull out of Iran without approval from the European Commission face the threat of being sued by EU member states.
Many European commentators said the EU scheme would be unworkable, especially for European multinational corporations with business interests in the United States.
The London-based Financial Times wrote:
"Diplomats and lawyers have raised serious doubts about the EU's ability to protect European businesses operating in Iran from the US measures.
"The blocking statute, first drawn up in 1996, has rarely been tested. One senior EU official said there was little legal precedent for judges in EU member states to reclaim damages from third countries like the US if sued by companies."
In France, Le Figaro wrote that European Commission's response to US sanctions was "hasty" and amounted to a "political gesture."
Le Monde described the EU's measure as a "political signal for the Iranian regime, which demanded signs of European commitment to defend the JCPOA."
L'Express noted: "If a company is active in the big US market and the small Iranian market, then it does not benefit much from the fact that its activities are protected in Europe and Iran but not in the United States."
Radio France Internationale (RFI), a French public radio service, said that the effects of the Blocking Statute would be "more symbolic than economic." It added:
"The law would be more effective for Small and Medium-sized Enterprises (SMEs) doing business in Iran. For large corporations, the solution lies in negotiating waivers or exemptions with the United States. But such requests from France, Germany and the United Kingdom have already been rejected by Washington."
La Croix wrote: "Suffice to say that the implementation of this blocking law remains very hypothetical, as it goes into uncertain legal territories.
"Companies investing in Iran do not seem to believe much in the effectiveness of the regulation. The oil group Total, the ship-owner Maersk or the automaker Peugeot have already decided to leave. German group Daimler announced its withdrawal from Iran yesterday. These groups are more afraid of the US's ability to implement sanctions than the EU's wrath."
In Germany, the public broadcaster ARD published an opinion article by Brussels correspondent Samuel Jackisch titled, "Well Roared, Paper Tiger — EU Defenseless against US Sanctions." He said that the EU's new policy was "logical, but largely meaningless," and an attempt by EU foreign policy chief Federica Mogherini to "defend her political legacy." He added:"The EU can try to turn the tables on transatlantic relations, but in the end the US still comes out on top.
"The German export industry's business with Iran may not be small at around three billion euros. However, the bottom line is that the same companies export 35 times as much to the USA. The EU is demanding that its largest corporations risk the entire cake for a few more crumbs."
German public broadcaster ZDF wrote: "The peculiar construction of the EU Blocking Statute remains: Ordinarily, regulations and laws prohibit something. For example, an anti-dumping law prohibits companies from price dumping in order to force competitors out of the market. But the EU Blocking Statute is a call to action: Do trade with Iran and do not let threats from the US president dissuade you!
The newspaper Westdeutsche Allgemeine Zeitung quoted the Chief Executive of the German Chamber of Industry and Commerce (DIHK), Martin von Wansleben, who described the EU's measure as a "helpless political reaction." He said that its purpose was to show that the EU does not bow to US sanctions. For individual companies, he said, the blocking regulation has "no relevance."
In Austria, Der Standard wrote: "The Blocking Regulation is not an effective antidote to US sanctions, as the historical example suggests.... Although Washington should refrain from extraterritorial sanctions, the US market is too important for corporations to expose themselves." In Italy, Südtirol News quoted stock market expert Robert Halver of Baader Bank: "Due to the US sanctions against Iran, German industry will not touch Iran. If you realize that German industry is doing a hundredfold business in America, you will not do business with Iran, because then sanctions against German companies will exist. Therefore, Iran is certainly going to bleed very heavily at the moment."
The European edition of Politico wrote: "Some experts say the EU's moves are unlikely to have the desired effect, arguing that the blocking statute would create legal burdens for Europe-based companies without preventing the US from targeting their American branches and assets. For many companies, the risk of being cut off from business in the US — a far bigger market than Iran — is enough to make them want to comply with Washington's demands." An investment banker quoted by Reuters said: "It would be suicide to do any new business or funding for Iran or Iran-related companies without explicit guarantees from the US government. They have us by the throat because so much business is conducted and cleared in dollars. The fines are in the multibillions these days so it's just not worth the risk for a small piece of business and maybe pleasing a European government."
As if to prove the point, moments before US sanctions against Iran entered into force, Daimler, the German car and truck manufacturer, dropped plans to expand its Iran business. "We have ceased our already restricted activities in Iran in accordance with the applicable sanctions," Daimler said in a statement.
Daimler follows similar decisions by: Adidas (Germany); Allianz (Germany); AP Moller-Maersk (Denmark); Ciech (Poland); Citroen (France); CMA CGM (France); DZ Bank (Germany); Engie (France); ENI (Italy); Lloyds (UK); Lukoil (Russia); Maersk Tankers (Denmark); Oberbank (Austria); Opel (Germany); Peugeot (France); PGNiG (Poland), Renault (France); Scania (Sweden); Siemens (Germany); Swiss Re (Switzerland); and Total (France).
*Soeren Kern is a Senior Fellow at the New York-based Gatestone Institute.
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