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French Carmaker Likely To Halt Iran Operations As Other Companies Leave

In this Thursday, July 16, 2015 photo, Iranians look at a Renault sedan at a dealership in northern Tehran, Iran.
In this Thursday, July 16, 2015 photo, Iranians look at a Renault sedan at a dealership in northern Tehran, Iran.

French car manufacturer Renault says it is likely to leave Iran to avoid renewed U.S. sanctions in spite of previous promises to remain.

Several other major companies including Maersk, Total, Peugeot, General Electric, Boeing, Reliance, and Siemens have already left Iran to evade U..S sanctions, which economic experts in Iran say will hit Iranians even harder in about four months’ time.

Bloomberg quoted Renault Chief Operating Officer Thierry Bollore as saying on July 27, "Iran operations are likely to be put on hold to comply with U.S. sanctions."

“We are looking to new business opportunities, particularly in Africa, with strong growth to offset the missed opportunities in Iran,” he said.

Even in June this year, Renault was more or less certain it would not leave Iran. Renault CEO Carlos Ghosn said at the time that the carmaker would maintain its presence in Iran despite the risk of penalties for breaching renewed U.S. sanctions targeting Iran's auto and civil aviation sectors from August 4.

"We will not abandon it, even if we have to downsize very strongly," Ghosn told shareholders at the annual shareholders' meeting in Paris, since this would give the company an advantage "when the market reopens."

Ghosn had said previously that the company would seek new ways to avoid the sanctions and maintain its presence in Iran even if it had to seriously reduce the level of its activities.

Reports from Iran say Renault has sold some 160,000 cars in Iran during the past year.

Most French companies hoping to continue business in Iran after the U.S. sanctions will find it impossible, Finance Minister Bruno Le Maire said on June 19.

These companies "won't be able to stay because they need to be paid for the products they deliver to or build in Iran, and they cannot be paid because there is no sovereign and autonomous European financial institution" capable of shielding them, Le Maire told BFM television.

Renault's rival, PSA, which manufactures Peugeot and Citroen cars, has also decided to leave Iran, according to reports from Iran.

In late June, Tehran urged foreign firms working in Iran to resist U.S. "threats" of sanctions, adding it was in talks with French carmakers about remaining in the country.

"Foreign companies working in Iran should not be intimidated by U.S. threats and should continue their activities in Iran," Industry Minister Mohammad Shariatmadari told a news conference in Tehran, adding, "All those who do not do this, we will replace them."

The United States pulled out of the nuclear deal with Iran in May and announced it would impose renewed sanctions on Iran in August and November. Subsequently, European officials have been trying to pursue Washington to exempt European companies working with Iran, but Washington has refused to do so.

Washington has also vowed to minimize Iran's oil exports. However, Treasury Secretary Steven Mnuchin said earlier this week that Washington would consider exempting some countries from U.S. sanctions on Iran's oil exports in order to prevent disruptions on the world oil market.

French carmakers are not the only companies leaving Iran's automobile industry. Japan’s Mazda and South Korean Hyundai also suspended contracts with Iran in June, according to a member of the parliamentary Industries and Mines Commission.

In an interview with the parliament-affiliated website, Valiyollah Maleki said June 12, “Mazda and Hyundai’s interests in the U.S. market are much more than in Iran, and they will not sacrifice their profit for the sake of Iran.”

Renault is not active on the U.S. market. However, Renault partner Nissan is a key player there, and Renault may have hesitations, fearing its activity in Iran might affect Nissan’s business in the United States.