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How Trump's Iran deal exit could hit aviation, oil and car industries How Trump's Iran deal exit could hit aviation, oil and car industries
(about 1 hour later)
Billions of dollars of deals signed by international companies with Iran are under threat after the US president, Donald Trump, announced he would pull out of a “rotten” nuclear deal with Tehran. Billions of dollars of deals signed by international companies with Iran are under threat after the US president, Donald Trump, announced he was pulling out of a “rotten” nuclear deal with Tehran.
Iran’s agreement in 2015 to curb its nuclear ambitions led to the US easing crippling sanctions, in a rapprochement in which major firms seized an opportunity to invest in a global top-30 economy with a population of around 80 million. Iran’s agreement in 2015 to curb its nuclear ambitions led to the US easing crippling sanctions, in a rapprochement in which big firms seized an opportunity to invest in a global top-30 economy with a population of about 80 million.
Within a year, landmark deals were being signed in sectors including oil and gas, aviation and the automotive industry, with firms in France, the UK and Germany among the quickest to invest.Within a year, landmark deals were being signed in sectors including oil and gas, aviation and the automotive industry, with firms in France, the UK and Germany among the quickest to invest.
Shares in several major Iranian investors, including Airbus, Renault and the Peugeot owner, PSA, fell in early trading on Wednesday amid concern about the impact on doing business, while oil prices reached a three-and-a-half-year high. Shares in several large Iranian investors, including Airbus, Renault and the Peugeot owner, PSA, fell in early trading on Wednesday amid concern about the impact on trading, while oil prices reached a three-and-a-half-year high.
A new regime of sanctions means restrictions are expected on everything from the export of machine parts from the US to loans made in dollars. A new regime of sanctions means restrictions are expected on many aspects, from exports of US machine parts to loans made in dollars.
Companies with any exposure to Iran will also have to tread very carefully or face the prospect of huge fines.Companies with any exposure to Iran will also have to tread very carefully or face the prospect of huge fines.
Oil and gasOil and gas
In December 2016, Royal Dutch Shell signed a provisional agreement to develop the Iranian oil and gas fields in South Azadegan, Yadavaran and Kish. While drilling is still a long way off, sanctions are likely to put any preparations already being made on ice.In December 2016, Royal Dutch Shell signed a provisional agreement to develop the Iranian oil and gas fields in South Azadegan, Yadavaran and Kish. While drilling is still a long way off, sanctions are likely to put any preparations already being made on ice.
The French oil firm Total is in a similar boat, having agreed to help Iran develop the world’s largest gas field, South Pars. Shell and Total were issued licences to build petrol stations in Iran, too.The French oil firm Total is in a similar boat, having agreed to help Iran develop the world’s largest gas field, South Pars. Shell and Total were issued licences to build petrol stations in Iran, too.
In 1935, BP became the first company to extract petroleum from Iran, in its previous incarnation as the Anglo-Persian Oil Company. The British oil giant did not rush in alongside Total and Shell, choosing instead to send in staff on a fact-finding mission. In 1935, BP became the first company to extract petroleum from Iran, in its previous incarnation as the Anglo-Persian Oil Company. The British oil company did not rush in alongside Total and Shell, choosing instead to send in staff on a fact-finding mission. However, it could still be affected.
However, it could still be affected. Late last year it agreed to sell three North Sea gas fields to Serica Energy for $400m. One of the fields, known as Rhum, is co-owned by a subsidiary of Iran’s national oil company. That means a licence is required from the US Office of Foreign Asset Control (OFAC) to allow US nationals or companies to work on it. Late last year BP agreed to sell three North Sea gas fields to Serica Energy for $400m. One of the fields, Rhum, is co-owned by a subsidiary of Iran’s national oil company. That means a licence is required from the US Office of Foreign Asset Control (OFAC) to allow US nationals or companies to work on it.
If Serica cannot obtain that licence as a result of new sanctions, it faces the risk of being unable to call on US-owned companies in the event, for instance, of a fire or an oil spill, severely restricting its emergency options. If Serica cannot obtain that licence because of new sanctions it faces the risk of being unable to call on US-owned companies, in the event, for instance, of a fire or oil spill, severely restricting its emergency options.
The sale is not yet complete and it is unclear whether it will go ahead now. The sale is not yet complete and it is unclear whether it will go ahead now. “We take care to ensure we always comply with applicable sanctions,” BP said.
“We take care to ensure we always comply with applicable sanctions,” BP said.
There is an upside to the tension for oil companies, though. Sanctions on Iran are likely to push up oil prices, which have been persistently low amid a global supply glut. Brent crude oil reached $77.20 in early trading in London on Wednesday, the highest level since November 2014.There is an upside to the tension for oil companies, though. Sanctions on Iran are likely to push up oil prices, which have been persistently low amid a global supply glut. Brent crude oil reached $77.20 in early trading in London on Wednesday, the highest level since November 2014.
AviationAviation
Two of the big beasts of aviation, Airbus and Boeing, had deals in place worth $39bn to sell aircraft to Iran. The US treasury secretary, Steven Mnuchin, said on Tuesday that the companies’ licences to export to Iran will be revoked. Two of the big beasts of aviation, Airbus and Boeing, had deals in place worth $39bn to sell aircraft to Iran. The US treasury secretary, Steven Mnuchin, said on Tuesday that the companies’ licences to export to Iran would be revoked.
The largest deal was an agreement by IranAir to buy 100 aircraft from Airbus. Although Airbus is European, more than 10% of parts and labour used to build its planes comes from the US. The largest deal was an agreement by IranAir to buy 100 aircraft from Airbus. Although Airbus is European, more than 10% of parts and labour used to build its planes comes from the US. The company employs about 10,000 people in the UK, at Filton and Broughton.
The company employs around 10,000 people in the UK at Filton and Broughton, and a spokesman said jobs would not be affected. An Airbus spokesman said jobs would not be affected. “Our [aircraft order] backlog stands at more than 7,100 aircraft, this translates into some nine years of production at current rates. We’re carefully analysing the announcement and will be evaluating next steps consistent with our internal policies and in full compliance with sanctions and export control regulations. This will take some time.
“Our [aircraft order] backlog stands at more than 7,100 aircraft, this translates into some nine years of production at current rates.
“We’re carefully analysing the announcement and will be evaluating next steps consistent with our internal policies and in full compliance with sanctions and export control regulations. This will take some time.
“From what we can see today, there is no foreseeable impact on the production at Broughton plant in Wales due to that announcement, which we should not be able to mitigate in the timeframe mentioned above.”“From what we can see today, there is no foreseeable impact on the production at Broughton plant in Wales due to that announcement, which we should not be able to mitigate in the timeframe mentioned above.”
British Airways resumed direct flights between London Heathrow and Tehran in 2016 after four years, following the lifting of sanctions. The Guardian has approached the parent company, International Airlines Group, for comment on whether the route could be affected.British Airways resumed direct flights between London Heathrow and Tehran in 2016 after four years, following the lifting of sanctions. The Guardian has approached the parent company, International Airlines Group, for comment on whether the route could be affected.
AutomotiveAutomotive
Several partnerships involving European carmakers look set to come screeching to a halt as a result of fresh sanctions, with French firms particularly badly affected. Several partnerships involving European carmakers may come screeching to a halt due to fresh sanctions, with French firms particularly badly affected.
Renault and PSA, which owns Citroen, Peugeot and Vauxhall, saw their shares fall on the Paris stock exchange on Wednesday as investors digested the impact.Renault and PSA, which owns Citroen, Peugeot and Vauxhall, saw their shares fall on the Paris stock exchange on Wednesday as investors digested the impact.
When sanctions were lifted, France’s Renault signed a $778m deal to make 150,000 cars a year outside Tehran. PSA signed agreements with local partners to produce hundreds of thousands of vehicles in Iran.When sanctions were lifted, France’s Renault signed a $778m deal to make 150,000 cars a year outside Tehran. PSA signed agreements with local partners to produce hundreds of thousands of vehicles in Iran.
In PSA’s case, the result was a significant rise in sales in a region where it was once the leading carmaker. PSA has said it hopes the European Union can reach a common position on Trump’s new sanctions, without saying what that might be. In PSA’s case there was a significant rise in sales in a region where it was once the leading carmaker. PSA has said it hoped the EU could reach a common position on Trump’s new sanctions, without saying what that might be.
PSA was producing cars in Iran as part of a joint venture with local firm Iran Khodro. The Tehran firm also signed a deal last year with the trucks division of Mercedes-Benz, owned by Germany’s Daimler, with car production slated to follow this year. Fellow German auto giant Volkswagen had also restarted exports to Iran. PSA was producing cars in Iran as part of a joint venture with a local firm, Iran Khodro. The Tehran firm also signed a deal last year with the trucks division of Mercedes-Benz, owned by Germany’s Daimler, with car production slated to follow this year. The German auto firm Volkswagen had also restarted exports to Iran.
Iran nuclear dealIran nuclear deal
Automotive industryAutomotive industry
Airline industryAirline industry
Oil and gas companiesOil and gas companies
IranIran
EuropeEurope
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