BERLIN — German chemical giant BASF has made a firm commitment to comply with all U.S. sanctions against Iran, becoming the latest in a string of large European companies to back away from ambitious plans to invest in the Islamic Republic following Washingtons withdrawal from the Iran nuclear deal.
BASF said in a statement that while it will maintain a business presence in Iran, it would “strictly comply with all prevailing rules.” That means BASF will have to steer clear of Irans oil and gas industries, its main interest in the country, where the company had hoped to invest through its oil exploration subsidiary, Wintershall.
“BASF has confirmed that they will comply with U.S. sanctions,” Richard Grenell, the U.S. ambassador to Germany, told POLITICO. “This is the right decision.”
The move by BASF, which followed intense behind-the-scenes discussions with U.S. officials, marks a further blow to Irans authoritarian regime as it struggles to get the countrys economy, beset by inflation and high unemployment, on track. The country is in sore need of foreign capital and expertise. The Iranian currency, the rial, has plummeted since the U.S. announced it would reimpose sanctions, hitting a record low against the dollar earlier this month.
BASFs decision is also a setback to EU efforts to preserve the nuclear deal and keep European companies involved in Iran.
Iran diverts its economic resources away from its people to support Hezbollah and the Assad regime” — U.S. Ambassador to Germany Richard Grenell
A limited set of U.S. sanctions against Iran took effect in early August, but in November a much tougher round focused on the oil and banking sectors will go into force, further squeezing Irans economy.
The EU, which wants to preserve the nuclear deal, is working with France and Germany on a plan that would allow companies to circumvent the U.S. sanctions. But for big companies with extensive American operations, such as BASF, which generates a quarter of its revenue in North America, those plans come both too late and are insufficient to shield them from legal jeopardy in the U.S.
BASF, the worlds largest chemical-maker, re-entered Iran following the 2015 nuclear deal between Tehran and several global powers aimed at preventing the country from developing an atomic weapon. In 2016, Wintershall signed a memorandum of understanding with the state-owned National Iranian Oil Company. Last month the German company said it would abandon the planned cooperation.
BASF booked about €80 million in revenue in Iran last year, a fraction of the companys €65 billion in global sales. Like many other large European companies, BASF saw a lucrative opportunity to help Iran tap its oil and gas reserves, among the worlds largest, after international sanctions against Tehran were lifted.
The Trump administration has made confronting Iran a top foreign policy priority, citing concerns over the threat the regime in Tehran poses to both Israel and the broader region, including through its support of Syrian dictator Bashar al-Assad and Hezbollah, the Lebanon-based terror group.
“Iran diverts its economic resources away from its people to support Hezbollah and the Assad regime, spreading violence and instability across the globe,” Grenell said.
Washingtons decision in May to withdraw from the nuclear accord, which it argued is insufficient to keep Iran in check, has prompted scores of European companies that had hoped to do business with Iran and invest there to reconsider those plans.
In addition to BASF, major German companies to withdraw or scale back their activities in Iran include Mercedes parent Daimler, Deutsche Bahn, the national railway, insurance giant Munich Re and engineering group Siemens. Other big European companies, including Frances Total, have also decided to pull back.