.@JunckerEU #Sofia #Iran “Need to protect our companies, notably SMEs. @EU_Commission will start work tomorrow on amending the Blocking Statute to include US Iran sanctions. Aim is to get it in place before sanctions kick in on 6 August. We need to do it and we will do it.”
EU Commission President Jean-Claude Juncker announced that the bloc plans to kickstart a 1996 law that would prohibit European companies from complying with US sanctions on Iran.
European Union Commission President Jean-Claude Juncker announced Thursday that the bloc plans to reactivate a law that would seek to block European companies from complying with any sanctions the US would reintroduce against Iran.
Juncker’s announcement came during the second day of an EU meeting in the Bulgarian capital, Sofia, which had already been marked by sharp criticism from European leaders over American President Donald Trump’s decision to pull the US out of the 2015 Iran nuclear deal.
What Juncker said:
- In Thursday’s announcement, Juncker said: “As the European Commission we have the duty to protect European companies. We now need to act and this is why we are launching the process to activate the ‘blocking statute’ from 1996.”
- Juncker said that the law would be launched Friday morning at 10:30 a.m. local time (0730 GMT).
- He added that European leaders “also decided to allow the European Investment Bank to facilitate European companies’ investment in Iran” and said the Commission would continue to cooperate with Iran.
What is the 1996 blocking statute?
- A blocking statute is a law enacted in a local jurisdiction that attempts to hinder application of a law made by a foreign jurisdiction.
- The 1996 legislation protects “against the effects of the extra-territorial application of legislation adopted by a third country.”
- It was originally developed to get around a US trade embargo on Cuba and sanctions related to Iran and Libya, though it was never enacted because the disagreements were settled politically.
- In the current proposed application, the law would attempt to shield European companies that do business with Iran from future US sanctions by prohibiting the companies from respecting US sanctions.
- It also would not recognize any court rulings that enforce the American-issued penalties.
What effect could the blocking statute have?
- In order to have any effect, the blocking statute would have to be updated to include US nuclear-related sanctions on Iran — a lengthy process that would require consent from the EU’s 28 member states.
- The law’s potential economic effect remains unknown, since it was never used during the Cuban embargo.
- In addition, its regulatory language is nebulous, and the measures it lays out to block European companies’ from bowing to US sanctions could prove difficult to enforce, in part due to the international banking system and the significance of the US in international financial markets.
- Many European governments see the blocking statute as a political tool, which could put pressure on the US to walk away from punitive financial punishments.
How have European companies responded?
- German-headquartered insurance firm Allianz and Danish shopping company Maersk have already said they plan to close operations in Iran in order to avoid getting hit by reintroduced US sanctions.
- The 1996 legislation leaves it up to each EU member state “to determine the sanctions to be imposed in the event of breach of any relevant provisions of this Regulation,” adding that such sanctions “must be effective, proportional and dissuasive.”
- European companies with large operations in the US are putting pressure on their governments to grant them individual waivers.
What is the Iran nuclear deal?
The 2015 Iran nuclear deal was a pact negotiated by Iran, China, Russia, Germany, France, and Britain, as well as the EU and the US, that authorized the lifting of economic sanctions against Tehran in exchange for the dismantling of its nuclear program and compliance with international atomic regulations.
Read more: What is the Iran nuclear deal?
What did President Trump decide to do?
The president decided that he would withdraw the US from the accord, which he referred to as “flawed,” thereby raising the specter of renewed sanctions against companies that do business with Iran.
What was the reaction to Trump’s decision?
The deal’s other signatories have pledged to continue their commitment to the deal and encouraged Iran to uphold its responsibilities as well. EU foreign ministers met their Iranian counterpart earlier this week to discuss how they could keep the nuclear deal alive without the US. In particular, both sides have discussed how to keep revenue flowing into Iran in light of pending sanctions.
cmb/msh (dpa, Reuters, AP)
President Donald Trump said he was working with Chinese President Xi Jinping to keep ZTE Corp. in business, throwing an extraordinary lifeline to the Chinese telecommunication giant that has been laid low by U.S. moves to cut off its suppliers.
The surprise intervention comes less than a month after ZTE was hit with an order banning U.S. companies from selling components to the Chinese business. The U.S. Commerce Department directed companies to stop exporting to ZTE in mid-April, saying the Chinese firm violated the terms of a settlement resolving evasion of U.S. sanctions against Iran and North Korea.
The Commerce Department is reviewing ZTE’s request for a stay of that order.
Mr. Trump said in a tweet that he is working with Mr. Xi to get ZTE “a way to get back into business, fast. Too many jobs in China lost.” He said the Commerce Department has been instructed to “get it done!”
Mr. Trump’s comments about the company and concern about Chinese jobs come as the U.S. and China are locked in high-stakes negotiations over trade and intellectual property. Both countries are threatening to slap tariffs on tens of billions of dollars of the other’s products. Mr. Trump has regularly blamed China for U.S. job losses and Beijing’s policies for the U.S. trade deficit, making his shift in tone notable.
U.S. concerns about ZTE go beyond its evasion of sanctions. For years, the U.S. has accused equipment made by Shenzhen-based ZTE and its larger crosstown rival Huawei Technologies Co. of being a national security threat, an accusation that both companies have denied.
The U.S. has largely blocked both companies from selling telecommunications gear in the U.S., and the Pentagon recently pulled mobile phones made by both competitors from stores on U.S. military bases.
ZTE continues to sell phones in the U.S. through a number of retail channels, including through Best Buy Co. stores and through AT&T Inc. stores and its website, representatives from both companies said last week.
Phones made by Huawei, the world’s No. 3 handset maker, are more difficult to find in the U.S. The company was set to launch a high-end handset earlier this year with AT&T but the U.S. carrier pulled out of the deal at the last minute without explaining why.
Nodding to security concerns, Rep. Adam Schiff of California, the top Democrat on the House Intelligence Committee, responded on Twitter to the president’s remarks: “Our intelligence agencies have warned that ZTE technology and phones pose a major cybersecurity threat.” He chided Mr. Trump: “You should care more about our national security than Chinese jobs.”
Senate minority leader Chuck Schumer (D., N.Y.) tweeted in response to Mr. Trump: “How about helping some American companies first?”
Late Sunday, amid confusion about the meaning of Mr. Trump’s comments, the White House issued a statement saying that the ZTE matter would be decided independently by the Commerce Department.
“The administration is in contact with China on this issue, among others in the bilateral relationship,” a White House spokeswoman said. She said that Mr. Trump expects Commerce Secretary Wilbur Ross to “exercise his independent judgment, consistent with applicable laws and regulations, to resolve the regulatory action involving ZTE based on its facts.”
The Commerce Department declined to comment.
Some Wall Street observers have speculated that the administration hoped to use the ZTE sanctions as leverage to soften Chinese resistance in other trade negotiations. One possible indication of that was the Commerce Department’s failure to impose about $300 million in fines it was eligible to collect when it announced the penalties on ZTE earlier this year.
- U.S. Firms Given Forum to Object to China Tariffs
- Retreat From Trade Deals Poses a New Threat to Dollar
- ZTE Asks for Stay of U.S. Ban on Selling to Company
- Pentagon Orders Stores on Military Bases to Remove Huawei, ZTE Phones
- In ZTE Battle, U.S. Suppliers Are Collateral Damage
- U.S., Britain Issue Warnings Over Chinese Telecom Equipment Maker ZTE
The Commerce Department also has signaled in recent days that it was trying to expedite ZTE’s appeal, suggesting the agency was sensitive to the urgency of ZTE’s situation.
ZTE, which relies on billions of dollars in component imports from U.S. tech titans such as Qualcomm Inc. and Intel Corp. , has warned the ban threatened its survival. Last week, the company said it had ceased major business operations.
A person close to ZTE said Sunday: “ZTE has noticed the tweet from President Trump, and welcomes this latest progress. Next, under the guidance of the Chinese government, ZTE will continue to communicate with relevant parties including the U.S. Department of Commerce to facilitate the final resolution.”
The Wall Street Journal reported Saturday that in its efforts to have the ban stayed, ZTE has told U.S. authorities that process and human-resource errors, not a plan of systematic deception, were responsible for the lapses in fully complying with its 2017 settlement, according to a person familiar with the matter. The company also believes that the ban is a disproportionate penalty, this person said.
The sudden sales ban placed ZTE at the sharp end of a rising trade dispute between Washington and Beijing that has included tit-for-tat tariffs. Technology has become a focus of tensions, with the U.S. accusing China of transferring key technologies back home and unfairly supporting domestic champions.
Chinese representatives complained to their U.S. counterparts about the ban during a recent visit by a U.S. trade delegation to Beijing. The export ban was expected to figure in another round of trade talks between the two sides in Washington.
In a subsequent tweet at midafternoon Sunday, Mr. Trump said that China and the U.S. “are working well together on trade” but “it is hard for them [China] to make a deal that benefits both countries.” He added: “But be cool, it will all work out!”
The U.S. and China are also in talks with North Korean leader Kim Jong Un about the regime’s nuclear-weapons program. Mr. Trump is set to meet Mr. Kim in person in Singapore on June 12 to discuss denuclearization.
ZTE employs roughly 75,000 people world-wide and is the fourth-largest mobile phone vendor in the U.S., selling 19 million phones in America last year, making it the firm’s biggest market.
Backed by the Chinese government as a tech national champion, ZTE works alongside Huawei in the race to develop next-generation 5G wireless technology—an area in which Qualcomm is viewed by Washington as a crucial U.S. competitor. ZTE sent 11 representatives to a recent industry-sponsored meeting in India to discuss 5G specifications, according to conference records.
In 2017, Huawei led the global telecom-equipment market with a 27% share, followed by Finland’s Nokia Corp. at 17% and Sweden’s Ericsson AB at 13%, according to research firm Dell’Oro Group. ZTE was fourth with 10%. But in the U.S., Ericsson and Nokia each held a 48% market share.
—Peter Nicholas contributed to this article.
The unilateral US withdrawal from the Iran nuclear deal is bringing Berlin and Moscow closer together. But can any cooperation counteract the threat of Washington’s sanctions for companies doing business in Tehran?
One unintended consequence of Donald Trump’s decision to pull the United States out of the Iran nuclear agreement has been to bring Germany and Russia together again.
German-Russian relations had soured because of alleged Russian cyberattacks and the Kremlin’s annexation of Crimea. But the US President’s hardline policy on around the Joint Comprehensive Plan of Action (JCPOA) for Iran has intensified the search for common ground in Berlin and Moscow. German Chancellor Angela Merkel is scheduled to meet Russian President Vladimir Putin in Sochi on May 18, and on Friday morning the two spoke on the telephone.
“The importance of preserving the deal from a point of view of international and regional stability was highlighted,” the Kremlin said in a statement following the call.
Merkel’s spokesman, Steffen Seibert, said that the two leaders had agreed to push for the other signatories to the deal — France, the UK and China — to continue abiding by it. Merkel also touched on the future of the agreement in remarks she made in the city of Münster on Friday.
“I believe it is not right that a deal which was agreed, which was voted upon in the UN Security Council and unanimously approved, should be unilaterally terminated,” Merkel said, adding that the US decision “damages trust in the international order.”
Russia and China essential to the Iran deal
The foreign ministers of Germany, France and the UK will meet with their Iranian counterpart next Tuesday in Brussels. But equally important, if the JCPOA is to survive, would be coordination with Russia and China, since those two nations can offer Tehran the biggest incentives to stay in the nuclear deal.
China is the largest purchaser of Iranian oil, and the two countries agreed to increase their trade to $600 billion (€502 billion) over 10 years — by comparison, annual German-Iranian trade amounts to around €3 billion. In 2014, Russia signed a five-year, $20 billion energy deal with Iran that sidestepped then-applicable Western sanctions. Trade between the EU and Iran has remained sluggish even after the loosening of the sanctions in early 2016.
In Sochi, Merkel is likely to lobby Putin to give Tehran guarantees of future economic cooperation in return for abiding by the provisions of the JCPOA. In February, Russia’s ambassador to Iran told the Tass news agency that the two countries were looking into alternatives to the US dollar as a trading currency.
For his part, Putin will probably want Germany to include Russia in any demands it makes to the US for exemptions of European firms to punitive secondary sanctions on countries doing business with Iran — the main crux of whether the JCPOA can survive Washington’s withdrawal and a point on which Germany is itself unsure.
Legal advice but little else
In Münster, Merkel acknowledged that she was uncertain “to what extent this agreement can be kept alive, if a giant economic power doesn’t join in.”
Trump’s decision on Tuesday triggered a process by which all sanctions upon Iran in place before the nuclear deal was agreed in 2015 are to be re-imposed. It is unclear to what extent the US will seek to punish German and European firms who don’t fall in line, but theoretically any companies trading with Iran that also do business in or with the US could be affected.
“The United States is a big gorilla on the world stage,” international trade lawyer Judith Lee told broadcaster CNN. “We try to not only control our companies, but also try to control what other countries’ companies do.”
The list of major European firms that could be hit with millions in secondary sanctions includes Airbus, French energy giant Total, German electronics leader Siemens and carmakers Volkswagen and Peugeot. German Economy Minister Peter Altmaier, who’s also headed to Russia next week, has promised firms doing business with Iran practical and legal advice, but little else. Even Altmaier acknowledges that this is nothing more than “damage limitation.”
It’s not hard to understand the reason for German reticence on this score. According to the US Census Bureau, Germany’s annual exports to the US amounted to $118 billion in 2017 — a sum that dwarfs the business with Iran.
The death of the West?
Trump’s unilateralism — and in particular a brusque tweet by the new US ambassador to Germany— have been interpreted as attempts by Washington to impose its policy and law beyond its borders. That has led some commentators to diagnose a breakdown in solidarity between the US and Western Europe.
The Financial Times newspaper postulated that Tuesday “may be remembered as the day the US abandoned its belief in allies.” Those sentiments were echoed by Elmar Brok, a conservative German Member of the European Parliament.
“We have to acknowledge that on these and other issues that Western unity is crumbling, and there is no partnership,” Brok told a German radio station. “This means that we now have to try, together with the Chinese and the Russians, to keep the Middle East free of nuclear weapons.”
But Merkel has resisted any talk of the “death of the West.”
“This is a serious event,” Merkel said in Münster, referring to the US withdrawal from the nuclear deal. “But it is not a reason to call into question the entire trans-Atlantic partnership.”
A more likely outcome is that Trump’s decision will encourage more cooperation between Iran and China regardless of what the US or the Europeans want. China opened a new rail connection with Iran to transport goods on Thursday, and it’s thought that Chinese companies are ready to swoop in, should Total cancel its contract with Iran.
Black Monday was followed by an even blacker Tuesday. Sparked by new US sanctions, Russia’s stock market looks unlikely to recover from its crash anytime soon. What does it mean for everyday people?
“Sanctions? Our nuclear missiles are laughing themselves silly.” That was a common slogan on Russian T-shirts in 2014, as economic pressure mounted following Russia’s annexation of the Crimean Peninsula. Initially, sanctions were applied cautiously by the United States and its allies and were very limited in scope.
Russia adjusted to the “new economic reality,” a euphemism for the confrontation. In 2017, the economy began to grow once again. It is questionable whether the same will happen after the latest round of sanctions.
New punitive measures introduced by the United States on April 6 have led to a massive crash in Russia’s stock and currency markets. Media report that new US sanctions on seven oligarchs, 17 top officials and 12 companies led to tens of billions of dollars in losses on Russian markets within just a few hours on Monday.
The slide continued on Tuesday, and there is no end in sight. Pressure exerted on bonds and Russia’s currency, the ruble, has also increased as further sanctions are discussed in response to the poisoning of the former Russian-British double agent Sergei Skripal. A proposal currently making the rounds in the US Congress would expand sanctions to target Russian sovereign debt.
Should that happen, it would be “economic warfare,” warned Alexander Shoshin, chairman of the Russian business association RSPP.
But targeted individuals and their companies are not the only ones suffering from the latest US sanctions: Other corporations and banks are feeling the heat as well. Stock losses, for instance, are hitting Sberbank, Russia’s largest bank. Meanwhile, the government has claimed that the situation is under control and promised financial assistance.
Business empire struggles
The 50-year-old businessman Oleg Deripaska will need that assistance more than anybody. The United States has singled him out with some of the toughest sanctions because of his perceived proximity to the Kremlin. His business empire, Basic Element, was one of the main targets.
Basic Element is reported to have more than 150,000 employees worldwide. The company website claims that 15 percent of Russia’s population is “directly or indirectly” linked to the firm. Among those connected to Basic Element are Rusal, the world’s largest aluminum producer, and the conglomerate Russian Machines, which has a number of subsidiaries in the automobile, aircraft and railway technology sectors.
The automobile manufacturer GAZ from Nizhny Novgorod also belongs to Russian Machines. It is a traditional Russian company, and it was in front of GAZ’s workers that Vladimir Putin announced he would run for a fourth presidential term in December. He was re-elected in March.
It remains unclear whether jobs will be directly threatened at Deripaska’s companies as a result of US sanctions. Although the US is an important market for Russian aluminum, the lion’s share of Basic Element’s production is destined for the domestic market.
The bigger problem would seem to be the company’s foreign debt. Because of sanctions rules, that debt can only be serviced by the state. Observers say the Deripaska empire could eventually fall under state control as a result.
Many losers, some winners
Although most Russians have felt the effects of sanctions, they have so far not been so dramatic. The currency market suffered a similar crash in late 2014, yet the cause then was a global drop in the price of oil — Russia’s most important export product and its largest source of foreign currency.
Domestically, many Russians will likely feel the first consequences of the devaluation of the ruble as a result of sanctions when purchasing electronic goods. The business magazine Vedmosti reports that prices for products such as smartphones and laptops are expected to rise 5-10 percent.
And last year the number of Russians vacationing abroad declined because of the devaluation of the ruble. The inland tourism industry, however, has benefited somewhat from the current situation. For instance, Russians who forgo trips to Turkey because of increased expenses can vacation on the Crimean Peninsula instead.
The hospital has said that Skripal is no longer in critical condition. Meanwhile, the US announced a raft of new economic sanctions against Moscow.
Salisbury District Hospital in the UK announced on Friday that Sergei Skripal was “responding well to treatment, improving rapidly and is no longer in a critical condition.” The poisoned former Russian spy has been in the hospital for over a month after being poisoned.
On March 4, Skripal and his daughter Yulia were found severely ill on a park bench in Salisbury after being exposed to a nerve agent, which investigators say was smeared on the door handle of their house. Yulia Skripal has also begun to recover.
The sophistication of the attack on Skripal has led Western governments to blame Moscow for the incident, resulting in the mass expulsion of Russian diplomats from a slew of countries across Europe and North America. However, the British military facility analyzing the substance has stated that it cannot prove unequivocally where it came from or that the Kremlin was responsible, resulting in no small amount of embarrassment for the administration of Prime Minister Theresa May.
US slaps sactions on Russian oligarchs, government officials
Separately, the US Treasury announced a list of economic sanctions against seven Russian oligarchs, 17 government officials as well as businesses. The move “generally” prohibits US persons or entities from dealing with the people and firms on the sanctions list.
The sanctions were not in response to any one activity, but rather in general the “malign” activity of Moscow.
The targets of the sanctions mostly involve Russia’s energy and financial sectors. Among those hit were Gazprom chief Alexei Miller, Putin’s son-in-law Kirill Shamalov, aluminum magnate Oleg Deripaska, and Andrey Kostin, who leads the nation’s second-largest bank, VTB, which is state-controlled.
“The Russian government operates for the disproportionate benefit of oligarchs and government elites,” said US Treasury Secretary Steven Mnuchin. “The Russian government engages in a range of malign activity around the globe, including continuing to occupy Crimea and instigate violence in eastern Ukraine, supplying the Assad regime with material and weaponry as they bomb their own civilians, attempting to subvert Western democracies, and malicious cyber activities. Russian oligarchs and elites who profit from this corrupt system will no longer be insulated from the consequences of their government’s destabilizing activities.”
The Kremlin responded by saying that the individuals and companies affected would receive extra support from the government, if necessary. Russian Security Council Secretary Nikolai Patrushev added that this would not deter Moscow from seeking contacts with the US.
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Optimists declared a major breakthrough. Even pessimists acknowledged that Trump’s hard line against Pyongyang, after decades of less forceful U.S. effort, played a significant role in moving one of the world’s most vexing and threatening problems in a potentially positive direction.
But in the afterglow of the surprise announcement — hinted by Trump in a teasing visit to the White House press room and soon confirmed by South Korea’s national security adviser, standing in the West Wing driveway — questions were fast and furious.
Were direct talks between Kim and Trump, two notably volatile leaders who have traded public insults for more than a year, the best way to start what are sure to be complicated negotiations? Was the administration, whose thin bench of experienced experts seems to be growing slimmer by the day, ready to face those wily and untrustworthy North Koreans? The talks, U.S. and South Korean officials said, would take place before the end of May.
By some assessments, this is really a victory for Kim, who for years has sought proof of his status and North Korea’s power by dangling the offer of leader-to-leader talks with the United States.
Some analysts said it remains unclear what Trump is prepared to put on the table opposite Kim’s apparent offer to stop testing nuclear weapons and ballistic missiles and discuss denuclearization. “Sanctions? Normalization? Peace treaty?” tweeted Victor Cha, the expert who was once Trump’s choice as ambassador to South Korea, before he voiced concern that the White House was contemplating a pre-emptive military strike against Pyongyang.
According to a senior administration official, who briefed reporters on the condition of anonymity, the answer is not very much.
There would be no reward for talks themselves, the official said. Trump would expect a dismantled nuclear weapons program, with complete “verification,” and “will settle for nothing less.”
But “President Trump has a reputation for making deals,” the official added. “Kim Jong Un is the one person able to make decisions in their uniquely totalitarian system and so it made sense to accept the invitation with the one person who can make decisions instead of repeating the long slog of the past.”
Trump has a vibrant track record of surprise announcements that have distracted attention, at least temporarily, from concern over tariffs and border walls and the growing threat to his presidency posed by the special counsel investigation into Russian interference in the 2016 election.
At the same time, he has claimed a long string of successes over the past 14 months that others have challenged as lacking a strategy for long-term sustainability, from the currently robust economy to the defeat of the Islamic State in Iraq and Syria.
The North Korea gambit may be his highest-wire act of all.
“A Trump-Kim summit is a major diplomatic gamble,” tweeted Richard Fontaine, president of the Center for New American Security. “But let’s see if it actually comes off. Recall that yesterday, we were set to impose steel tariffs on Canada.”
Among experts, there were widely divergent views of what had happened, and why, and what the risks were.
“Beyond the initial shock value of the invitation from Kim Jong Un to Trump,” and Trump’s acceptance, “I think the real underlying questions are still what are they going to negotiate,” said Lisa Collins, a fellow with the Korea Chair at the Center for Strategic and International Studies. “Two months doesn’t give working-level officials much time to pull things together.”
“It’s certainly the start of talks. Whether or not it’s a true breakthrough in terms of change in North Korea’s calculus, I’m still a little skeptical,” she said. “I tend to be more of a pessimist.
Adam Mount, a senior fellow at the Federation of American Scientists, said it was “absolutely right to extend the nuclear and missile test pause” declared by Pyongyang during talks last week with the Seoul government. “It will help repair ties with South Korea and keeps us back from the brink of war.”
“Unfortunately,” Mount said, “denuclearization is a distant fantasy.” The administration “has not equipped itself for success. They have not laid the groundwork for credibility in talks [and] lack leadership with experience in international negotiation. . . . In accepting the invitation outright, Trump has already lost much of his leverage over the terms and agenda of the talks.”
The “better play,” he said, “is to start by offering a credible plan to stabilize the peninsula and halt nuclear and missile tests sustainably, and then build out to a more ambitious agreement.”
Others were less skeptical. Robert Carlin, who led numerous U.S. delegations to North Korea and served in various senior intelligence and diplomatic roles during previous outreaches to Pyongyang, cited North Korean statements over the years that indicated its nuclear weapons program was largely developed as leverage to gain economic stability.
In a seminal statement in March 2013, Carlin recalled, Kim said that North Korea’s nuclear policy would proceed rapidly to “blunt the American threat and create a peaceful environment so that we can concentrate on the economy. This is his victory. It’s really important for him and they probably believe it.”
“We can’t push them around. They do have nuclear weapons,” Carlin said. But “they do have a leader who wants to pivot to the economy. Let’s test that. Let’s see if we can use [Kim’s] own momentum, like jujitsu, to help accomplish what we want.”
David Nakamura, Ashley Parker and Anne Gearan contributed to this report.
Courtesy: The Washington Post