Trump's Iran Decision Throws New Uncertainty Into Business Plans

In the 21 months since a landmark nuclear agreement freed Iran’s economy from crippling economic sanctions, investors eager to tap the country’s energy reserves and its 80 million consumers have waited for signs it was safe to enter the market in full force.

Donald Trump is about to signal that they should keep waiting.

The U.S. president is poised to announce on Friday that the multinational deal that eased sanctions in exchange for curbs on Iran’s nuclear program isn’t sufficiently beneficial to the U.S. That will heighten the uncertainty for businesses such as Boeing Co., Airbus SE and General Electric Co. that have ventured into Iran and for others that were already hesitating.

“It will add to the chilling effect, and the Iranians won’t like it,” said Robert Einhorn, a senior fellow at the Brookings Institution in Washington.

While Trump is expected to stop short of abandoning the nuclear accord for now, he may press Congress -- and other nations -- to rework terms of the deal and to impose new restrictions on behavior by the government in Tehran that the U.S. considers hostile, including its ballistic missile program and support for groups such as Hezbollah.

Fresh doubt about the agreement’s fate threatens to upend deals already forged by American, European and Asian companies in industries from oil to transportation to solar power. And Trump’s action could weaken support for the deal in Iran, whose leaders have already complained they aren’t seeing the benefits promised under the Obama administration.

Zarif’s Complaint

Iranian Foreign Minister Javad Zarif made a point of what he considers U.S. foot-dragging during a meeting on the sidelines of the United Nations General Assembly in New York last month, where the U.S. spelled out its objections to the Iran deal. Zarif accused Trump of violating the agreement’s terms by denying licenses to companies to do business in Iran.

“This is a Pandora’s Box,” Zarif told Secretary of State Rex Tillerson of U.S. plans to demand new terms, according to a transcript of his remarks seen by Bloomberg News. “Now, today I am saying again the licenses have stopped since the administration came to office.”

Boeing, the world’s largest jet manufacturer, is working to close its first orders from Iran’s airlines since the Islamic revolution of the late 1970s. The Chicago-based company is scheduled to begin initial deliveries next year for the first of 80 aircraft ordered by Iran Air under a deal valued at $16.6 billion before customary discounts. Boeing is still completing licensing for a $3 billion pact with Iran Aseman Airlines.

Trump’s refusal to certify the Iran accord wouldn’t immediately affect the orders. Treasury Department licenses for the exports would remain in place unless they are revoked by the Trump administration, or unless sanctions are reimposed by Congress.

“We continue to follow the U.S. government’s lead in all our dealings with approved Iranian airlines ‎and will remain in close touch with U.S. regulators for any additional guidance,” Boeing said in a statement.

Airbus, Boeing’s European competitor, already has delivered the initial planes in a separate $19 billion sale to Iran Air. An Airbus representative declined to comment.

GE’s Affiliates

GE has several businesses with interests in Iran. In the second quarter, affiliates of GE’s oil and power-generation divisions won orders in the country valued at about $18 million combined, according to a regulatory filing.

The biggest windfall for Iran has been in oil. It now exports about 2.3 million barrels of crude oil every day. France’s Total SA in July became the first major Western oil company to sign a production deal with Iran since the nuclear accord was completed.

Even so, other companies have held off because of remaining sanctions or fear that restrictions lifted under the nuclear deal would be reimposed. That reluctance has already sparked tension between the U.S. and its allies, many of which are demanding assurances that their companies won’t face punishment for doing business in Iran.

“We want clarity, legal security for our companies,” French Finance Minister Bruno Le Maire said in an interview after meeting U.S. Treasury Secretary Steven Mnuchin in Washington on Thursday. He said the U.S. shouldn’t assume it has the right to act as the world’s policeman.

Banking Difficulties

Financing may be hit hardest by Trump’s action Friday. While aerospace and energy companies may be willing to do business, banks are far more reluctant given the complexity of their business and lack of certainty.

“Iran has struggled to reintegrate and get major international banks to deal with them,” said Katherine Bauer, a former U.S. Treasury official in the Obama administration. “They’ve been able to get trade financing working with small banks in Europe, but what they’ve really needed was investments.”

The scenario investors will confront tomorrow is far different from the one they faced in April of last year, when then-Secretary of State John Kerry went on a roadshow to try to persuade banks it was safe to do business in Iran. Now, some law firms are advising clients that quick-turnaround contracts might be safe but to avoid any long-term investment.

“When it’s a longer-term investment or a big capital investment or something that would be really hard to unwind, that carries a different risk profile,” said Tom Feddo, a partner at Alston & Bird and former assistant director at Treasury’s Office of Foreign Assets Control. “Folks are going to remain on the sidelines and watch and wait.”

— With assistance by Kambiz Foroohar, Mark Deen, Julie Johnsson, and David Wethe

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