EghtesadOnline: A new EU helpdesk for European SMEs and the slow progress of INSTEX were among a wide range of topics discussed at the Europe-Iran Business Forum on 1-3 March.
Ambrosetti Middle East and Bourse and Bazaar co-organized the major online event, which also covered the promising business opportunities in Iran.
Ambassador Michael Bock admitted that INSTEX, with its barter and internal balancing system, was not really a success story. It had been able to establish a viable business model, good personal relationships with STFI in Tehran and expanded to a staff of seven.
However, Bock insisted, INSTEX and STFI were political tools in a larger context and could only promote humanitarian trade if there was the same political position in Tehran, Berlin, Paris and London.
Iran rejected the small trades suggested by EU. Major European banks were also still treating INSTEX as semi-poisonous, preferring to mitigate its US risk by conducting no Iran business.
Dead-End With European Banks
Even when the Joint Comprehensive Plan of Action was in place in 2016-17, several restrictions and decisions by major European banks continued to keep European business away from Iran.
President Trump unilaterally broke US obligations under JCPOA in 2018. European governments then designed regulations to protect and European multinationals and small- and medium-sized enterprises (SMEs) from possible extraterritorial US sanctions.
The multinationals had the experience and resources to perform good due diligence on partners, but more often conflicting business interests in the US. SMEs were more free, but they often had difficulties in understanding the US-derived risks of otherwise legal business in EU.
Even if the documentation of SMEs was in order, major European banks were mostly still unwilling to support Iran trade. Some SMEs fell victim to over-compliance. Others stopped considering Iran business or turned to a few smaller banks or other legal but costlier means.
Due Diligence Helpdesk
The European Commission, therefore, created a due diligence desk to help SMEs, a major source of employment and innovation in Europe.
The helpdesk worked closely with banks and with INSTEX to determine the details needed for compliance. It gives practical help to an SME to perform the due diligence assessment, a partly automated process. It also reaches out to the Iranian business partner, who then completes questionnaire and provides compliance documentation.
If sufficient, the helpdesk will give the transaction a clean bill of health, which could be used in dealings with European banks.
If there would be issues of concern or missing information, then further information would be requested or additional research would be done. This may include interviews with local stakeholders to understand the nature of the business transaction.
The EU’s support means that the helpdesk at www.sanctions-helpdesk.eu has the capacity to evolve as needs are identified.
Goals Exceed Capabilities
Peiman Seadat, director general for Western Europe at Iran’s Ministry of Foreign Affairs, stated at the conference that the European Union also suffered from unilateral extraterritorial sanctions.
Although INSTEX emanated from nine sovereign states in Europe, major European banks still followed the lead of USA.
The main geopolitical conclusion after the conference is threefold: European companies considering business in Iran will receive support from their governments, who are learning by doing.
However, the governments have not yet found a way to persuade major European banks to follow suit.
The very limited ability of European governments to successfully assert their sovereignty against the USA will continue to hobble European business.
However, many SMEs and multinationals will remain interested in Iran’s valuable opportunities. As ambassador Bock emphasized, much strategic patience is still required.