France squared up to the Trump administration on May 11 arguing that European companies should not have to suffer financially for the unilateral decision of the US to abandon the multilateral nuclear deal with Iran.

In what may be seen as a first shot across the bows of Washington as Europe tries to persuade Iran that it can make staying in the international accord economically worthwhile, French Foreign Minister Jean-Yves Le Drian told Le Parisien in an interview: "We feel that the extraterritoriality of their sanction measures are unacceptable. The Europeans should not have to pay for the withdrawal from an agreement by the United States, to which they had themselves contributed."

The Europeans, he added, would "put in place the necessary measures to protect the interests of our companies and start negotiations with Washington".

French Finance Minister Bruno Le Maire has also issued a warning to the White House, telling reporters: “We have to work among ourselves in Europe to defend our European economic sovereignty.” Europe could use the same instruments as the US to defend its interests, he added.

“At the end of May I will meet with the British and German finance ministers and the three of us will look at what we can do,” Le Maire also said.

The EU’s big guns—France, Germany and the UK—have vowed to Tehran that they regard the nuclear deal, otherwise known as the Joint Comprehensive Plan of Action (JCPOA), as holed but not sunk. On May 8, they moved to set up a crisis meeting with Iran—now scheduled for May 14—to start work on salvaging it. There have also been encouraging noises from the other deal signatories, Russia and China. They too insist the US has no right to wreck the deal for all participants.

Sanctions ‘immunity’
If the US does not agree to sanctions waivers for non-American companies continuing to trade with or invest in Iran, the EU, Russia and China may have to attempt to ‘immunise’ enterprises that are exposed to American action. But that could be challenging—many such traders and investors have US assets or could be hit via American pressure exerted via the international financial system. French energy major Total, for instance, which last year agreed to invest an initial billion dollars in developing the giant South Pars gas field off the Iranian Persian Gulf coast, has sizeable assets in the US. Its CEO Patrick Pouyanne last November said a US nuclear deal pullout would cause it to review its contract with Iran. Total is believed to have already invested towards a $100mn in the South Pars project.

Other French companies which stand to lose out are Peugeot carmaker PSA Group and fellow automaker Renault. Europe’s Airbus, meanwhile, uses American components in its aircraft, thus it requires licensing from Washington to sell planes to Iran. The Iranians have plans to spend $38bn on acquiring Boeing and Airbus aircraft. But all of that business could now be cancelled. Both European and American companies will also be frustrated if the unravelling of the JCPOA denies them a chunk of the $200bn of investment contracts Tehran wants to arrange to develop its rundown oil, gas and petrochemical industries.

If Europe and the other signatories still in the accord want to save the JCPOA, they will have to move fast. Iran’s centrist-pragmatic President Hassan Rouhani has said that Europe has a “very limited opportunity” to save the deal, while Iran’s Supreme Leader Ayatollah Ali Khamenei—in a scornful address directed at Trump during which he exclaimed “Like hell, you will” in a retort aimed at the threats sent Iran's way by the US president—remarked that he was extremely dubious as to whether Iran should place any faith in Europe’s Big Three to come through for it. “If you can’t get a definite guarantee [on what they are offering], then the nuclear deal cannot be continued,” he said.

Trump’s move has left Rouhani exposed to hardliners who say Iran should never have trusted the West to stick to an agreement such as the JCPOA. 

Staying vocal
Partly to shore up Rouhani’s position to win enough time for an attempt at salvaging the JCPOA, France, Germany and the UK are staying vocal. Foreign Secretary Boris Johnson has vowed the UK will not abandon the nuclear deal and has challenged Trump, who described the JCPOA as “defective to its core”, to come up with a better way to keep Iran’s nuclear development programme in check. However, the UK, which will hope to boost transatlantic trade with the US after it leaves the EU, is likely to tread that much more carefully than France or Germany when it comes to fending off the effects of Trump’s nuclear deal hard exit.

In further remarks to Le Parisien, Le Drian said the commitment of other partners to the Iran deal should be respected and noted that the impact of the US move was already being felt in higher oil costs—Iran has the world’s fourth largest oil reserves and second biggest gas reserves—and rising political uncertainty in the Middle East.

In his update on the European response to the US ending its participation in the accord, Le Maire talked of a “second avenue” which would look at Europe’s financial independence. “What can we do to give Europe more financial tools allowing it to be independent from the United States?” he asked. One proposal in circulation is for the EU to set up a purely European finance house to oversee euro-denominated transactions with Iran.

German Economy Minister Peter Altmaier told media on May 10 he wants to work with impacted companies to try to "minimise the negative consequences" of the US pullout, adding: "That means, it is concretely about damage limitation."

Following Trump’s announcement that to the US the nuclear deal is dead, US National Security Advisor and foreign policy hawk John Bolton told reporters that the US Treasury Department would allow up to 180 days for foreign companies that do business with Iran to end their contracts or face sanctions. Any foreign companies that over the next six months enter new business deals with Iran will face sanctions, the US Treasury later added.

Late on May 10, in the wake of military clashes between Iran and Israel in Syria, the US moved to bar US individuals and entities from commercial relations with six Iranian individuals and three companies which Washington says are tied to Iran’s Islamic Revolutionary Guard Corps (IRGC).

The penalties were aimed at those who had funnelled millions of dollars to the IRGC, funding its "malign activity", according to US Treasury Secretary Steven Mnuchin.