Automaker Peugeot PSA withdraws from Iran, others likely to follow as the deadlines approach
French automaker Peugeot PSA has halted its investments in Iran in response to the US decision to withdraw from the Iran nuclear deal. PSA was in joint ventures with Iranian carmakers Iran Khodro Industrial Group and Saipa. However, it is now seeking a waiver from the US with the French government support.
Commodity Inside View: We do not expect that Peugeot PSA decision is going to impact the overall company sales as it is a very small share, around 1%, of its total revenue. However, its implications for the Iranian market will be significant which accounts for about 30% share of sales in the market.
Trump’s unilateral decision to abandon the nuclear deal has put a number of investment projects under threat of massive fines including PSA joint ventures signed in 2016, to produce the new Peugeot 2008 crossover with Iran Khodro Industrial Group, and to build Citroën vehicles with SAIPA. French rival Renault SA also started a partnership with locals in 2017 and is likely to follow the suit of withdrawing from Iran soon.
The decision comes after French energy company Total SA announced to stop operation on its South Pars gas field project in Iran as a consequence of the US decision and to ask for a waiver. We understand that there is potential for raising waiver which will not be easy to obtain. In the past some companies had waivers, though the current circumstances are enormously different and saving the deal on just waivers would not be acceptable for Iran.
European leaders promised to honour the deal and tried to keep their companies carry on business in Iran despite the renewed threat of US sanctions. It has been in the interest of both US and Europe to help Iran reaping the economic benefits of multibillions projects in return to swear off its nuclear weapons development programme.
Commodity Inside understands that if the withdrawals continue without bringing the US back to the negotiation table, then the nuclear deal will remain untenable for Iran. The US set 6th August the deadline for automakers to wind up their operations in Iran, while for energy and financial services businesses the deadline is 4th November.
France is currently playing a pivotal role in bringing the US to the negotiations table to save the deal, but the current withdrawal of the French companies from Iran suggests that negotiation seems to be not going in the right direction.
To learn more about this article or want to explore how we can help in your research please feel free to contact us at info@commodityinside.com
We are independent and highly approachable experts available to support you.