European businesses see bargains in Tehran despite Trump’s hostility

Iran made progress this week in preserving its new-found place in the global economy.

French energy giant Total and German carmaker Volkswagen announced agreements to plough money into the Islamic republic, the first to be finalised since US President Donald Trump took office, threatening to abandon the 2015 deal that rolled back a decade of sanctions on Iran.

The investments end months of speculation that America’s shifting foreign policy would scare western companies away from taking bets on the Middle East’s fastest-growing economy. They also highlight the widening rift between Trump and European allies, who back President Hassan Rowhani even as the White House reviews the nuclear accord he helped engineer.

“People were waiting for the sign to see which direction things will go,” said Homayoun Falakshahi, a senior research analyst for Middle East and North African upstream at Wood Mackenzie consultancy in London. Total’s plan to invest US$1 billion developing Iranian natural gas fields in particular, means “clearly the direction is that the likelihood of it being scrapped is not that big.”

The more business Europe has at stake in Iran, the less inclined it will be to backtrack on relations with Rouhani, who is keen to open the country to foreign investment. Iran boasts the world’s largest natural gas reserves and is home to 80 million consumers starved of most Western products for years under international sanctions.

If Trump wants to desert the deal, he’d need to convince Russia, a key Iranian ally, and China, which is developing the Iranian field alongside Total and local firms.