People inspect the new Peugeot 2008 car as they visit the Iran Khodro Industrial Group showroom in the Iranian capital Tehran, on October 5, 2016. The head of French car manufacturing giant PSA group, Carlos Tavares, is on a three-day visit to Iran. / AFP / ATTA KENARE (Photo credit should read ATTA KENARE/AFP/Getty Images)
A Peugeot in a Tehran showroom. Groups such as the car company and Total have announced they will halt dealings with Iran © Atta Kenare/AFP

European companies will be “on the railroad tracks” and at risk of US retaliation if they obey EU orders to defy Iran sanctions reimposed by Washington, a US state department official has warned.

Businesses that deal with the “enemy” in Iran will be barred from the US financial system, the official said, in a sign of the growing transatlantic fallout from the decision of Donald Trump, US president, to pull out of a landmark international nuclear deal with Iran

US officials have been holding talks with counterparts in Europe ahead of the planned reimposition of a second wave of Iran sanctions in early November. The EU has reacted with counter-measures including a “blocking statute” that threatens European businesses with legal action if they comply with the restored US sanctions.

European companies needed to be aware the US planned to exert “unrelenting pressure”, including the “strongest sanctions in history”, if Iran refused to negotiate, said the US official, who spoke on condition of anonymity. The November sanctions will target Iran’s oil exports and transactions with the central bank. 

“What we are saying is, if you decide to do business with an enemy of the United States of America, you will not be doing business with the United States,” the official said. “You will not have access to the US financial system. You will not be able to use the US dollar.” 

The European effort to neuter the US measures through initiatives such as the blocking statute and euro-denominated finance lines was “unhelpful”, the official said. The blocking statute risked “putting EU companies on the railroad tracks, frankly”. 

“It’s taking away the free right of European companies to make a choice: ‘Do we want to maintain relationships with Iran? Or do we want to maintain relationships with the US?’ the official said. “And if the answer is ‘we want to maintain relationships with the US’, I don’t think they should be punished for that by the EU.” 

EU diplomats retort that the US sanctions infringe efforts by the 2015 deal’s remaining signatories — France, Germany, the UK, China and Russia — to keep it alive. Iran agreed to curbs on its nuclear programme in exchange for economic benefits. 

But leading European companies, including Peugeot parent PSA and French oil group Total, have said they will halt their operations in Iran unless they secure a waiver from the sanctions triggered by the US exit from the deal in May. 

“Folks are pulling out of Iran, and by and large I have seen a very, very positive reaction to complying,” the state department official said. “So I don’t think anyone really has an appetite to conduct business with a terrorist-sponsoring regime at the cost and expense of conducting business with the US.” 

European countries argue that the nuclear deal is crucial to security beyond the Middle East. They also point to International Atomic Energy Agency assessments that Tehran has consistently complied with the agreement. 

Iran’s president Hassan Rouhani is due to meet his Russian counterpart Vladimir Putin on Friday for summit on Syria, which Recep Tayyip Erdogan, Turkey’s president, is also expected to attend. 

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