Iran deal: Who loses as US sanctions return

Now that the United States has ...

Posted: May 9, 2018 12:57 PM
Updated: May 9, 2018 12:57 PM

Now that the United States has decided to leave the Iran deal, the global economy is bracing for aftershocks.

President Donald Trump said Tuesday that the United States will begin reinstating sanctions on Iran. But the Middle Eastern country won't be the only party affected.

Under the 2015 agreement, the United States and other powers agreed to lift some economic sanctions if Iran agreed to rein in its nuclear program.

The pact opened the Iranian economy to Western companies eager to capitalize on its young, educated population and growing middle class.

Airlines, carmakers, hotel groups and oil companies all jumped to sign deals in Iran. The country's oil sector boomed and the economy grew.

Such enterprises could now turn into huge losses. The White House, in a fact sheet on the decision, said that "those doing business in Iran will be provided a period of time to allow them to wind down operations," and those that don't "risk severe consequences."

Here's who stands to get hurt:

1. Car drivers

Iran has the fourth largest crude oil reserves in the world, and claims nearly one-fifth of the planet's natural gas.

After sanctions were eased, the country ramped up production to about 3.8 million barrels a day. That's about 1 million barrels a day more than in early 2016.

New sanctions on Iranian oil exports would put a dent in global supply and could cause prices to spike. They've already soared 13% in a month, to their highest level in three years.

US gasoline prices have jumped to a national average of $2.81 a gallon, according to AAA. That compares to $2.66 a month ago and $2.35 a year ago.

Higher prices at the pump could hurt auto sales in the US and overall consumer spending.

Related: What Trump's Iran decision means for oil and gas prices

2. Boeing and Airbus

The biggest deals Iran signed with foreign companies have been for airplanes to modernize its creaky fleet.

Those are now off. Treasury Secretary Steven Mnuchin on Tuesday told reporters that licenses for Boeing and Airbus to export commercial planes, related parts and services to Iran will be revoked after a 90-day period.

Boeing previously planned to sell 80 jets to Iran Air. The first jets were due to be delivered this year.

It had also agreed to sell 30 737 MAX airplanes to Aseman Airlines, another Iranian carrier.

European rival Airbus, which has a plant in Alabama, had agreed to sell 100 jets to Iran.

Boeing said in a statement that it will consult with the US government on next steps.

"As we have throughout this process, we'll continue to follow the U.S. Government's lead," the company said.

The jet maker was already preparing to put the brakes on the Iran sales, and can afford to take the hit.

Airbus said in a statement: "We're carefully analyzing the announcement and will be evaluating next steps consistent with our internal policies and in full compliance with sanctions and export control regulations."

Related: China is the big wild card in Trump's Iran decision

3. GE, Volkswagen and Total

Fears over sanctions returning kept many major foreign companies on Iran's sidelines. But a handful plunged into deals that are now at risk.

Total, the French oil and gas company, signed a $2 billion agreement to help develop Iran's giant South Pars gas field, together with Chinese state oil company CNPC. Now the company is worried the agreement could collapse in the face of new sanctions.

General Electric received millions of dollars in orders from Iran in 2017, according to company filings, for its oil and gas business. This includes orders for machine parts and equipment used in gas plants.

GE said in a statement that it's still reviewing the decision.

"[We] will adapt our activities as necessary to conform with these changes in U.S. law," the company said. "GE's activities in Iran to date have been limited and in compliance with US government rules, licenses and policies."

And in 2017, Germany's Volkswagen announced that it will sell cars in Iran for the first time in 17 years.

4. Airlines and hotel groups

Travel operators have taken advantage of the renewed interest in Iran as a business and tourist destination since sanctions were eased.

European airlines such as British Airways and Lufthansa have resumed direct flights to the country, and Iranian authorities have relaxed visa requirements.

France's Accor was the first international hotel chain to open in Iran in 2015.

Spain's Melia and Rotana of the United Arab Emirates have also announced plans to open hotels in Iran.

5. Iran's economy

Growth has returned to Iran in recent years, but the economic recovery remains fragile. Sanctions would make the situation much worse.

The Iranian rial has plunged against the US dollar in recent months. The currency has lost more than 22% of its value over the past year, and media reports suggest the decline has been steeper on black market exchanges.

The fall has made imports more expensive, and some Iranians are reportedly cashing in their savings to buy dollars and euros.

Jason Tuvey, a Middle East economist at Capital Economics, said that the increasingly uncertain political environment would harm investment.

"A potentially more severe economic fallout could be triggered if Iran struggles to conduct international financial transactions," he added.

Valiollah Seif, the governor of Iran's central bank, says the country has enough foreign currency on hand to fund purchases of basic commodities and raw materials.

"Whatever the decision of the United States, it's not going to disrupt our economy," he said Tuesday, according to the semi-official Mehr news agency.

-- CNN's Ivana Kottasov-, Bijan Hosseini, Tania Carvalho and Zahraa Alkhalisi contributed to this report.

Terre Haute
Overcast
31° wxIcon
Hi: 37° Lo: 23°
Feels Like: 21°
Robinson
Overcast
31° wxIcon
Hi: 35° Lo: 22°
Feels Like: 19°
Indianapolis
Overcast
30° wxIcon
Hi: 32° Lo: 26°
Feels Like: 16°
Rockville
Overcast
27° wxIcon
Hi: 35° Lo: 23°
Feels Like: 15°
Casey
Overcast
30° wxIcon
Hi: 33° Lo: 22°
Feels Like: 19°
Brazil
Overcast
31° wxIcon
Hi: 35° Lo: 23°
Feels Like: 21°
Marshall
Overcast
31° wxIcon
Hi: 36° Lo: 23°
Feels Like: 21°
WTHI Planner
WTHI Temps
WTHI Radar

WTHI Events

 

Illinois Coronavirus Cases

(Widget updates once daily at 7 p.m. CT)

Cases: 720114

Reported Deaths: 12882
CountyCasesDeaths
Cook3042206595
DuPage45087788
Will38684563
Lake37299631
Kane31767467
Winnebago18948262
Madison14379255
McHenry14269156
St. Clair13410259
Champaign1079858
Sangamon1015799
Peoria9147133
Kankakee8636103
Rock Island8612135
McLean848954
Tazewell6835104
Macon6517132
Kendall626947
LaSalle6108134
DeKalb499047
Adams473548
Vermilion391551
Boone390733
Whiteside3743115
Williamson361083
Clinton330861
Coles329859
Ogle285037
Knox280766
Grundy277618
Effingham277021
Henry270015
Jackson268536
Marion248551
Stephenson246635
Randolph226826
Livingston224527
Macoupin223218
Morgan220936
Bureau211643
Monroe207545
Franklin204825
Lee201034
Christian189443
Jefferson187859
Woodford175827
Fayette170931
Logan170113
Iroquois169326
McDonough158241
Fulton146012
Shelby137426
Douglas135416
Jersey127224
Union118228
Montgomery115519
Crawford112213
Saline111625
Perry110223
Warren109020
Jo Daviess107617
Carroll107024
Lawrence107011
Bond104810
Pike101427
Cass96423
Hancock95612
Wayne90833
Moultrie89810
Clay84020
Greene82831
Edgar80815
Clark79820
Piatt7835
Richland78019
Ford75222
Mercer74510
Mason72120
Johnson7136
Washington7002
Jasper64411
Cumberland61416
White6148
De Witt61317
Massac5993
Wabash5708
Menard4661
Pulaski4132
Marshall4066
Hamilton3873
Brown3224
Henderson2891
Schuyler2711
Stark2683
Alexander2562
Calhoun2470
Putnam2430
Scott2310
Edwards2263
Gallatin1913
Unassigned1850
Hardin1551
Pope1011
Out of IL100

Indiana Coronavirus Cases

(Widget updates once daily at 8 p.m. ET)

Cases: 333312

Reported Deaths: 5685
CountyCasesDeaths
Marion45371865
Lake28722469
Allen19325304
Elkhart17945235
St. Joseph17599237
Hamilton14061171
Vanderburgh10280127
Tippecanoe920230
Porter873389
Johnson6973170
Hendricks6674158
Vigo637392
Monroe560850
Madison5410122
Clark540478
Delaware5184103
LaPorte492897
Kosciusko480741
Howard379478
Bartholomew347365
Warrick343073
Wayne340985
Floyd334978
Marshall317946
Cass307931
Grant295450
Hancock286957
Noble269347
Henry262837
Boone261955
Dubois249632
Dearborn238231
Jackson235534
Morgan228743
Gibson201229
Shelby199859
Knox196621
DeKalb190234
Clinton189222
Lawrence187949
Wabash181122
Miami176817
Adams176223
Daviess165845
Fayette157634
Steuben156415
Jasper155913
Montgomery154629
Harrison154124
Ripley151521
LaGrange150631
Whitley146815
Huntington140210
Decatur137144
Putnam134828
White134823
Wells134630
Clay132724
Randolph132622
Jefferson131316
Posey127718
Scott118921
Greene109053
Sullivan105016
Jay104414
Jennings97814
Starke96624
Spencer9078
Fulton88619
Perry86421
Fountain8608
Washington8387
Franklin75727
Carroll73713
Orange71828
Vermillion6867
Owen6598
Tipton62727
Parke6226
Rush5918
Newton58812
Blackford57312
Pike54020
Pulaski44215
Benton3843
Martin3826
Brown3705
Crawford3221
Union2862
Switzerland2725
Warren2653
Ohio2437
Unassigned0267