Can Europe save the Iran nuclear deal?

European companies doing business in Iran have a 6-month deadline to wind up investments or risk US sanctions.
Sunday 13/05/2018
British Prime Minister Theresa May (C), French President Emmanuel Macron (L) and German Chancellor Angela Merkel before their meeting in Brussels, last March. (Reuters)
Tough task. British Prime Minister Theresa May (C), French President Emmanuel Macron (L) and German Chancellor Angela Merkel before their meeting in Brussels, last March. (Reuters)

LONDON - After US President Donald Trump announced his withdrawal from the Iran nuclear deal, European allies scrambled to salvage as much of the agreement as possible. However, few observers said the deal could remain viable amid an increasingly complex international diplomatic scene and an intransigent Iranian reaction.

British Prime Minister Theresa May, German Chancellor Angela Merkel and French President Emmanuel Macron issued a joint statement expressing “regret and concern” at Trump’s decision and affirming their intention not to allow the Joint Comprehensive Plan of Action (JCPOA) to collapse.

“Our governments remain committed to ensuring the agreement is upheld and will work with all the remaining parties to the deal to ensure this remains the case including through ensuring the continuing economic benefits to the Iranian people that are linked to the agreement,” the statement said.

UK Foreign Secretary Boris Johnson told parliament that Britain had “no intention of walking away” from the deal. Johnson called on Washington to outline plans to secure a new settlement. “Britain stands ready to support that task but, in the meantime, we will strive to preserve the gains made by the [agreement],” he said.

French Foreign Minister Jean-Yves Le Drian stressed that the deal “is not dead.” He told France’s RTL radio that “there’s an American withdrawal from the deal but the deal is still there.”

Russian and Chinese officials expressed their commitment to the JCPOA, although it was unclear whether they would move in concert with Europe in any reaction to the deal.

The European Union — another JCPOA signatory — arranged a crisis meeting with Tehran, with Iranian President Hassan Rohani reportedly saying that Europe had a “very limited opportunity” to save the deal.

“As we have always said, the nuclear deal is not a bilateral agreement and it is not in the hands of any single country to terminate it unilaterally,” said EU foreign policy chief Federica Mogherini.

The European Union earlier floated plans to shield European companies from US sanctions. European companies doing business in Iran have a 6-month deadline to wind up investments or risk US sanctions. However, many European firms, which have sought to exploit the untapped Iranian market, will weigh costs and benefits considering possible US sanctions.

Trade between the European Union and Iran increased from $9.2 billion in 2015 to $16.4 billion in 2016 after the JCPOA was signed and $25 billion in 2017.

French energy firm Total CEO Christophe de Margerie called on the European Union to pass a blocking statute to protect European firms from US sanctions. Total is working on the South Pars project in an agreement worth around $3.8 billion.

Dieter Kempt, president of the Federation of German Industries, said German companies would look for ways to circumvent sanctions but expressed pessimism.

“Our firms have invested a lot of hope in the market openings that resulted from the lifting of the economic sanctions,” he told Britain’s Guardian newspaper. “Now these prospects have been considerably dampened.”

German trade with Iran rose 42% since 2015 to more than $4 billion a year.

While the European Union had said that it was considering plans on how to circumvent US sanctions, details were sparse.

Officials from the United Kingdom, France, Germany and the European Union’s foreign policy office asserted support for the deal during a meeting with Iranian Deputy Foreign Minister Abbas Araghchi in Brussels. They sought to assure Tehran that Europe would implement the JCPOA as long as Iran complied with its obligations, whatever Trump’s decision.

The months-long uncertainty over the deal and Trump’s repeated threats to withdraw gave the European Union time to formulate plans on how to keep the deal alive following a US withdrawal.

“The European Union should establish procedures that allow European companies to trade with Iran to entice Tehran to stay in the deal,” Cornelius Adebahr, a fellow at Carnegie Europe told Bloomberg News. “This includes setting up euro-denominated credit lines and clearing-houses that can green-light legitimate business with Iran.”

Adebahr, in testimony to the Committee on Foreign Affairs of the European Parliament in April, called on the European Union to use its foreign policy strengths to deal with the aftermath of a US withdrawal.

“It requires a cohesive approach built on identifiable interests and applying the appropriate instruments. This will bring the recognition by others that the European Union as a one-of-a-kind institution desires more than most established states,” he said.

4