In a clear response to the U.S. move, EU Commission President Jean-Claude Juncker has announced that the bloc plans to apply a 1996 law that would prohibit European companies from complying with any sanctions the USA will reintroduce against Tehran, Deutsche Welle reported.
The EU decision will allow the European companies to ignore the U.S. sanctions against Tehran.
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The "blocking statute" dates from 1996 and was created to defend companies working in Cuba from the effects of a U.S. trade embargo.
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The Commission said the EU measure would come into force within two months, unless the European Parliament and EU governments formally rejected it, but that it could also be activated sooner if there was strong political support.
The EU launched formal steps Friday aimed at sparing European firms fallout from United States sanctions on Iran as part of efforts to preserve the nuclear deal with Tehran.
The commission also wants to enable the European Investment Bank to finance activities in Iran, noting that this would be particularly useful for smaller firms.
"But the American sanctions will not be without effect".
European Union leaders reaffirmed their commitment to the nuclear deal at a summit in the Bulgarian capital Sofia this week, even as multinationals such as the French energy giant Total and Danish shipping company Maersk Line signalled their intention to pull out of Iran.
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It further pledged to continue energy sector cooperation, with EU Energy Commissioner Miguel Arias Canete due to visit Tehran at the weekend.
US President Donald Trump last week controversially pulled Washington out of the 2015 global deal with Iran that placed limits on its nuclear program in return for easing economic sanctions.
Earlier this year, the European Commission said it was looking to open talks with Iran regarding gas supply to the continent through the Southern Gas Corridor (SGC), a huge pipeline under construction.
Measures could include retaliatory sanctions, allowing the European Investment Bank to invest in Iran and co-ordinating euro-denominated credit lines from European governments.
In addition, Jean-Claude Juncker noted that EU leaders had "also chose to allow the European Investment Bank to facilitate European companies' investment in Iran" and that the European Commission would continue to cooperate with Iran.
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But, she added, "with the nuclear deal in place we have better chances to address any other issues we have to address with Iran". Europe and Iran have sought a united front to save the nuclear deal that US President Donald Trump abandoned last week.