VW plan to leave Iran symbolic win for Trump over EU, U.S. says

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VW was planning to import the Tiguan (pictured) and Passat under a contract with the Iranian automobile company Mammut Khodro.

The Trump administration convinced the Volkswagen Group to comply with sanctions against Iran and to put an end to almost all the activities in the country, according to an American official, a symbolically imposed step in undermining the European Union's efforts to reduce the nuclear deal. to keep 2015 alive.

The US and VW hammered the last details on Tuesday after weeks of talks, according to the American ambassador in Germany Richard Grenell, who led the discussion with the company based in Wolfsburg. VW will still be allowed to do business in Iran under a humanitarian exception, Grenell added.

Officials at VW did not respond immediately to a request for comments from Bloomberg News.

"Volkswagen has told us they will comply with US sanctions on Iran," Grenell said. "We are happy with this decision because Iran is diverting its economic resources from its people to spread violence and instability around the world."

Although VW's exposure to the Iranian market is not large, the company's decision is a symbolic blow that the EU's argument that Iran should remain in the nuclear agreement that has lifted a number of economic constraints to the country in exchange for restrictions further undermines the Tehran nuclear program. .

President Donald Trump withdrew the United States from the agreement in May.

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VW announced in July 2017 that it intended to sell cars in Iran for the first time in 17 years, benefiting from the removal of sanctions associated with the signing of the joint comprehensive action plan, as the nuclear agreement is formally known. It signed a contract with the local importer Mammut Khodro to offer the Tiguan compact SUV model and Passats to dealers in and around Tehran.

Andreas Renschler, a VW driver who oversees the company's commercial vehicle unit, announced on Tuesday that his division had suspended plans to expand to Iran.

Trump has warned countries that they must choose between doing business with the US, the world's largest economy or Iran. The administration has put in place teams of officials from the Treasury Department and is responsible for laying the foundation for the reallocation of the sanctions imposed in the context of the agreement, focusing on industries ranging from energy to chemicals to clothing.

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European leaders have argued that Iran, even without the US, would have to comply with the terms of the deal, but a major challenge was to ensure that it continued to enjoy some benefit from the stay. European companies ranging from oil giant Total to Adidas and Daimler have all said that they will cut back or abandon the market and the Iranian leaders have complained that Europeans have not done enough.

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This step will make it even more difficult for EU officials led by Federica Mogherini, the High Representative for Foreign Affairs, to persuade Iran to continue to comply with the terms of the deal. A senior official from the Department of Foreign Affairs, who asked not to be identified about the US strategy towards Iran, said that there is now no business left for the EU to protect in Iran and that the US had in fact won over her struggle to convince companies to leave.

Limited help

The official said that European countries and companies are much more closely aligned with the US than in that area with the EU. The official pointed to a deal in August in which the EU promised Iran $ 20 million in aid to counter the effects of US sanctions, as a clear sign of how little economic power could block the battle over US sanctions.

The other important factor is Iranian oil exports. Washington urges other countries to exclude their imports of Iranian oil on 4 November, when sanctions on the energy sector in Iran take effect. Iranian oil exports have dropped by 35 percent since April, the month before Trump withdrew from the deal.