President TrumpDonald John TrumpOregon governor to face state rep in November Ashford, Eastman neck and neck in Nebraska Dem primary Progressive pick Wild wins Dem primary for Pa. House seat MORE’s decision to pull out of the Iran nuclear deal could create a financial quagmire for U.S. allies who are suddenly at risk of being caught in economic sanctions.

Countries like the United Kingdom, France and Germany took advantage of the Obama-era nuclear deal to forge business ties with Iran, seizing the opportunity to sell to the country’s large and growing middle class. 

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But once sanctions are reimposed, those companies could be at risk of losing access to the U.S. market and its financial system if they continue to do business with Iran.

“The aftershocks of President Trump’s announcement are really being felt around the world,” said Andrew Keller, a partner at Hogan Lovells who helped craft the Iran deal’s sanctions relief provisions as a deputy assistant secretary at the Obama State Department.

“If the U.S. is aggressive, then you could see some explosion on the diplomatic front.”

Trump on May 8 announced that the U.S. would pull out of the Iran nuclear deal, which former President Obama and five other nations, plus the European Union, negotiated in 2015. The pact, which was not a formal treaty, came after the U.S. and allies started imposing sanctions on Iran in 2011, devastating its economy.

The U.S. will restore the sanctions lifted by the deal in several months. Those sanctions had blocked doing business with Iran’s energy, financial, shipping, insurance and auto industries. The sanctions will also bar aircraft companies from selling commercial planes to Iran and drastically limit imports from the country.

The Trump administration has given firms and countries several months to comply with the new sanctions, leaving the deal’s other signatories with difficult choices.

The U.K., France and Germany, all parties to the original negotiations, have doubled down on the Iran deal and pledged to fight the sanctions.

British Prime Minister Theresa May, French President Emmanuel Macron and German Chancellor Angela Merkel released a joint statement condemning Trump’s move while pushing Iran to “continue to meet its own obligations under the deal.”

“Our governments remain committed to ensuring the agreement is upheld,” the leaders said, “including through ensuring the continuing economic benefits to the Iranian people that are linked to the agreement.”

European officials have pursued exemptions for companies operating in Iran and have floated laws requiring firms not to suspend business there because of U.S. sanctions. French exports to Iran doubled to $1.79 billion last year, according to customs data reported by Reuters.

German exports to Iran rose to 3 billion euros, a 400 million euro increase, according to Reuters. Roughly 120 German firms operate in Iran, and nearly 10,000 German companies trade with Iran.

But any attempt to skirt Iran sanctions could spur the Trump administration to target European firms for exclusion from the U.S. financial system — a move with severe consequences.

“It’s pretty much the death penalty in that case for any business that wants to do business in the U.S. or even have the capacity to clear U.S. dollar transactions,” Keller said.

“Any bank or company that wants to do business in the U.S. or has exposure to the U.S., I think, would likely be reluctant to tempt the U.S. government on the sanctions front.”

The impact of Trump’s decision on the prices of oil, gasoline and other fuels has been central to concerns over the U.S. withdrawal from the deal. Oil dominates Iran’s economy, and the country has the fourth-largest proven oil reserves in the world, so sanctions or other supply disruptions could have impacts across the global economy.

“The combined effects of the congressionally imposed sanctions from 2011–12 have significant consequences on the Iranian economy, which is part of what forced them to the table,” said Jamil Jaffer, an adjunct professor of national security law at George Mason University.

Yet analysts said the impact of Trump’s announcement to pull out of the deal was muted. The price of West Texas Intermediate crude oil, the main domestic benchmark, was about $71 per barrel Tuesday, an increase of just around $2 from before the announcement.

That translates to merely 3 to 6 cents added to the price of a gallon of gasoline, said Patrick DeHaan, head petroleum analyst at GasBuddy.

Oil prices had increased about $20 per barrel since Trump was inaugurated, following a campaign in which he promised “a totally different deal” with Iran over sanctions.

But while some of the surge in gasoline prices could be attributed to market speculation over Trump’s actions, other factors have been at play as well, such as political unrest in Venezuela and production cuts from the Organization of Petroleum Exporting Countries.

It’s also possible that the U.S. economy won’t be affected by higher oil prices, said Antoine Halff, a senior research scholar at Columbia University’s Center on Global Energy Policy and a former chief oil analyst at the International Energy Agency.

Halff noted that even if oil and fuel prices increase in the United States, the impact to the overall economy might not be negative. Domestic oil production has increased significantly in recent years, so more of the additional money that consumers pay at the pump will stay within the country.

“Consumers would be paying a higher price at the pump, but more of it will stay within the United States, because more is produced domestically and the U.S. is a lot less import-dependent,” he said.

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