PSA Group was one of the first manufacturers to re-enter the country after sanctions were initially dropped ©PA Images
PSA Group was one of the first manufacturers to re-enter the country after sanctions were initially dropped ©PA Images

Call for Peugeot fine over Iran withdrawal

14 August 2018

An Iranian minister has called for car maker Peugeot to be fined for backing out of contracts it has already signed in the country.

Mohsen Salehinia, deputy industry minister, said the firm must pay a penalty for cancelling its contracts. It should fulfill its commitment to provide components and after-sale service for vehicles that have already been pre-sold, he added.

PSA Group, the French car maker behind Peugeot and Citroën, announced in June it had begun pulling out of Iran to avoid falling foul of the reintroduced US sanctions. Although PSA is not based in the US, the US sanctions, which came back into force last week, could heavily affect its business there.

Speaking to the state owned news agency Tasnim, Salehinia said PSA had not terminated but suspended its cooperation with Iran in the hope that it would resume operations in the future. He added that other car component suppliers may still refuse to work with Iran.

PSA Group was one of the first manufacturers to re-enter the country after a number of longstanding sanctions were dropped in 2016 as a result the Iran nuclear deal.

The firm had entered into a joint venture (JV) with Tehran-based car maker Iran Khodro that was expected to see a joint investment of up to €400m over five years. The JV had projected annual sales of 2m vehicles – including the latest Peugeot 208, 2008 and 301 models – by 2022.

However, soon after US president Donald Trump announced in May that the country was pulling out of the nuclear deal, PSA revealed it had begun suspending its JV activities to comply with the new sanctions.

Other French firms to announce their withdrawal from Iran include the gas and power group Engie and the oil firm Total.

Aerospace firms Boeing and Airbus are also at risk of losing out because of the sanctions, with Iran estimating contracts potentially worth $39bn could be lost. The US based Boeing has already said it would abide by the US government’s decision to cancel licences to sell $20bn of aircraft to Iran.

ART, a JV between Airbus and Italian firm Leonardo SpA, just managed to deliver a number of passenger planes to Iran Air before the US sanctions came back into force.

The Iran nuclear deal, formerly known as the Joint Comprehensive Plan of Action, was agreed between Iran, China, France, Germany, Russia, the UK, the US and the EU in 2015. Under the deal a number of sanctions on Iran were dropped in exchanged for the country’s commitment to stop producing enriched uranium, which could potentially be weaponised.

The US has so far been the only party to drop out of the accord. The EU is attempting to uphold the deal, supporting EU companies that wish to continue operating in Iran, including PSA, in challenging the US sanctions. It has so far had mixed success.

There are also concerns the US exit could lead to Iran calling off the deal entirely. Yesterday the ayatollah of Iran Seyed Ali Khamenei dismissed the idea of negotiating the future of the deal with the US, saying “at present, negotiations will be certainly detrimental to us”, the state news agency reported.

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