By Benoit Faucon
LONDON--PSA Peugeot Citroen SA (UG.FR, PEUGY) and hundreds of
smaller firms are feeling the sting of sanctions against Tehran as
the French government withholds 220 million euros set aside by an
Iranian bank for future payments for exports, due to a fear of
harming Peugeot's alliance with U.S. auto-maker General Motors Co.
(GM).
The holdup has also dealt a blow to smaller companies by
preventing them from fulfilling and receiving payment for pledged
deliveries to Iran of European goods not under sanctions. It
highlights France's struggle to balance the interests of its
companies against the desire to apply international pressure over
Iran's disputed nuclear program.
The French Treasury has refused to release any of the money
previously set aside in a Bank Tejarat account in Paris to
guarantee payments for exports. The deliveries had been committed
before the European Union introduced sanctions on the Iranian
commercial bank on Jan. 23, people familiar with the matter said
this week.
Although the EU had allowed a two-month period for completing
ongoing transactions with Bank Tejarat, the companies are still
waiting for the French Treasury to permit the funds' release. This
is because the French government first wants to ensure that
allowing the release of some of that money to Peugeot, for spare
parts orders from Iran Khodro Co. (IKCO1.TE), won't jeopardize the
French auto maker's alliance with General Motors, one person said.
Iran Khodro Co. assembles automobiles from kits provided by the
French company.
General Motors became the second-largest shareholder in Peugeot
in March, buying 7% for EUR240 million. The GM alliance with
Peugeot--Europe's second-largest car maker after Germany's
Volkswagen AG (VOW.XE, VLKAY)--also covers the joint development of
new parts and platforms on which their brands will base new
models.
That is seen as a key advantage in attempts to revive the
fortunes of the French car maker, which is struggling amid a
downturn in the European automotive industry.
"The 7% stake from GM is putting Peugeot's Iran payments under
pressure," but the French government wants to, "minimize the social
impact," of losing Iran's business, the person said. The Peugeot
plant that used to manufacture spare parts for Iran employed 280
people until it suspended operations.
"The [French] Treasury is awaiting approval from above," because
the matter is so politically loaded, one person familiar with the
matter said, adding that it was unclear whether this was needed
from the French presidency or another branch of government. The
French Treasury didn't answer repeated requests for comment over a
two-week period.
The French auto maker initially suspended deliveries to Iran
because it could not be paid for its Iran exports, said Dominique
Courgey, a trade union leader at a plant that supplied Iran.
To complicate matters further, the frozen funds are held at a
correspondent account held by Tejarat at Societe Generale, which
like many French banks has ended its Iran business to comply with
sanctions.
A correspondent account is an account established by a large
banking institution to receive deposits from or make payments on
behalf of smaller financial institutions.
In total, Peugeot has EUR280 million worth of letters of credit
blocked at the French bank, equivalent to 2.5 months of supply of
parts to Iran the company has already produced, but cannot deliver,
said Jean Paul Guy, a trade union representative at Peugeot.
They include the EUR220 million blocked at the Tejarat
correspondent account hosted by Societe Generale, according to a
person familiar with the matter.
A spokeswoman for Societe Generale said that, "[in] compliance
with all applicable regulations, Societe Generale has frozen the
accounts of Iranian banks with which it had dealings in the past,"
but declined to comment further. The U.S.' National Defense
Authorization Act for Fiscal Year 2012, which was signed into law
on Dec. 21, bans non-US banks from holding correspondent accounts
for Iranian banks.
Any release of letters of credit to Peugeot could complicate
matters for the General Motors tie-up, because Tejarat is under
sanctions in both Europe and the U.S., a person familiar with the
matter said. This leaves the future of the French auto maker's
business with Iran in limbo.
Both Peugeot and General Motors declined to comment on the
Tejarat funds.
A spokesman for General Motors did say that Peugeot had made the
decision to suspend the shipments of spare parts to Iran prior to
entering the alliance. "GM's agreement with Peugeot is fully
compliant with US law governing trade with Iran, and is not
intended to benefit Iran in any way," the spokesman for the U.S.
automaker said.
Peugeot's Iran business is particularly sensitive because the
U.S. Treasury holds a stake in GM. GM said in February that the
Treasury held a 31.9% stake.
That could make the very institution that enforces sanctions in
Washington an indirect beneficiary of Iranian business if Peugeot
received payment from the Middle-Eastern nation. Yet while
confirming Peugeot had suspended deliveries to Tehran for the time
being, a Peugeot spokeswoman said the company has not permanently
pulled out of Iran.
If Tejarat's funds are eventually released, one option is to use
some or all of the EUR220 million to finance export deals by 200
French and German companies that also have blocked letters of
credit from Iran, the people familiar with the situation at Tejarat
said.
Mecatherm SA of Schirmeck, eastern France, which exports bakery
ovens to Iran, and Sogeval SA, of Laval, western France, which
markets its veterinary products in the Islamic Republic, are among
those in this situation, the people said. The companies didn't
answer messages seeking comment.
The EU sanctioned Tejarat in January as part of broader pressure
against the Islamic Republic's nuclear program. The West suspects
the program has military aims, which Tehran denies.
One person familiar with the matter said some people in the
French government are confident the blocked letters of credit will
be released, although it's unclear when. The funds are likely to be
released because, "they have nothing to do with [nuclear]
proliferation," the person said.
Write to Benoit Faucon at benoit.faucon@dowjones.com (David
Pearson in Paris contributed to this report.)
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