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EU's Tough Choice: Analysts Say Staying In Iran Deal Is An Option If...

By Golnaz Esfandiari, RFE/RL

European officials eager to salvage 2-year-old nuclear curbs on Iran are said to be exploring ways to ensure Tehran's continued participation following the U.S. decision to abandon the so-called Joint Comprehensive Plan Of Action (JCPOA), under which Tehran limited sensitive nuclear activities in exchange for sanctions relief.

Shuttle diplomacy is under way, with face-to-face talks taking place among senior diplomats from some of the non-U.S. signatories to the deal, which include Iran, the European Union, Britain, China, France, Germany, and Russia.

EU foreign-policy chief Federica Mogherini has said that Brussels is determined to preserve the JCPOA, and Iranian President Hassan Rohani has signaled that Tehran will continue to participate, for the time being.

Analysts who spoke to RFE/RL suggested that a combination of legal, financial, and political steps by European countries could allow them to continue to extend Iran the benefits of the accord, including trade and investment.

Legal Steps

President Donald Trump announced on May 8 that the United States would abandon the deal and reimpose tough sanctions lifted as part of the nuclear accord.

Foreign companies have 90 days to comply with U.S. sanctions or face penalties.

So if their aim is to salvage the deal, EU countries presumably need to protect their companies from so-called secondary sanctions, which allow Washington to take action against individuals or companies that are doing business with sanctioned countries.

"One needs to be present in the U.S. economy to have a stake in the U.S. market in order for the sanctions to be effective," says Riccardo Alcaro, coordinator of research at Italy's Institute of International Affairs (IAI). "But given the fact that most European banks and major companies and a lot of medium-size enterprises do have a stake in the U.S. economy and are involved in the financial market, it is very difficult not to become the target of U.S. regulations."

Alcaro suggests that EU governments could deploy the "blocking statute" that was originally crafted in 1996 in response to U.S. sanctions against Cuba, to shield EU companies from U.S. sanctions and pressure.

"The blocking regulation makes it illegal for EU companies to comply with laws with extraterritorial application," Alcaro says.

It proved to be a successful deterrent in the Cuban case, he says, adding that the European pushback eventually prompted President Bill Clinton's administration to back down.

But in order to be reused, Alcaro says the blocking regulation needs to be amended.

"Basically, the blocking regulation would impose fines on EU companies and banks, which would thus face the dual risk of being sanctioned by the Americans if they do business with Iran and be sanctioned by the EU if they don't," Alcaro says.

Carnegie Europe senior fellow Pierre Vimont, a former French ambassador to Washington, agrees and says that such adjustments impose obstacles of their own. "In order to [amend the blocking regulation], you need to get the agreement of all 28 [EU] member states, and that may take some time," Vimont tells RFE/RL.

European countries could also take retaliatory steps such as a "clawback" clause, as described recently by the International Crisis Group (ICG), an NGO, allowing for the recovery of damages incurred for alleged sanctions violations through tariffs on U.S. exports to the EU.

In a similar vein, French Economy Minister Bruno Le Maire on May 11 proposed creating a European body that would have the same kind of powers that the U.S. Justice Department has to punish foreign companies for their trade practices. He cited the European Union's need to defend its "economic sovereignty" when it comes to the right to trade with Iran.

Financial Measures

Other European tactics could include specifically financial steps aimed at underscoring the delineation between doing business with Europe as opposed to the United States.

They might include, for instance, boosting ties between the Iranian Central Bank and European central banks.

Iran's Supreme Leader Ayatollah Ali Khamenei

 Naysan Rafati, an Iran analyst with ICG, says there are numerous ways that EU countries can enhance banking connections with Iran and offer European companies protection on a multilateral basis. He cites "increasing credit lines to Tehran, working with European investment banks to facilitate loans, [or] working with development agencies trying to find euros denominated [to] minimize the impact of U.S. secondary sanctions."

Rafati notes that several European countries have already taken individual steps to facilitate trade with Iran. "For example, the Italians issued a credit line under Invitalia; the French have announced that they will be issuing a credit line under Bpifrance; the Danes have been issuing a credit line," he says

Then he adds, "The question is whether Trump's decision will give them a push towards adopting more systematic, continental-level measures."

Political Moves

Alcaro and other analysts say EU countries might also engage in political actions in conjunction with any possible legal or financial steps, with the intention of raising pressure on the United States and encouraging Washington to make some concessions.

He suggests that these could take the form of "a public-diplomacy campaign in the United States aimed at those people in the U.S. administration, the Congress, the media, and the public...who doubt the wisdom of Trump's decision to make it clear that applying sanctions against the companies of allied countries doing legitimate business because the president had withdrawn the United States from a deal that the Europeans are also party to without a justification would be considered by the Europeans a serious breach of inter-ally solidarity and a betrayal of their security interests."

He speculates that a staunch European effort could even prompt U.S. officials to give EU companies some leeway for limited business with Iran.

Difficult Road, Limited Time

For now, Iran has pledged to adhere to its commitments under the nuclear deal.

But hard-line elements from the country's supreme leader on down appear to be putting pressure on Rohani.

Supreme Leader Ayatollah Ali Khamenei publicly expressed doubts last week that EU countries would deliver on their promises, and he challenged them to offer Iran guarantees.

A member of the influential Assembly Of Experts, Ayatollah Ahmad Khatami, told worshipers in a May 11 sermon in Tehran bluntly that "these European signatories [to the nuclear deal] also cannot be trusted," adding, "Iran's enemies cannot be trusted."

Trump & Iranian hardliners are united in tearing up JCPOA
cartoon by Mjtaba Heidarpanah, Iranian daily Ghanoon

Lawmaker Hossein Naghavi Hosseini said Tehran had given the European Union 60 days to guarantee the implementation of the nuclear deal, citing a meeting attended by Deputy Foreign Minister Abbas Araqchi, one of Iran's chief negotiators in the nuclear talks.

Vimont says time is of the essence -- "Europeans have to decide quickly" -- if the deal is to be kept alive.

Alcaro warns that Europeans may not be in position to invest as much in Iran as they would like. But at the same time, he says, European countries could make it clear to Iran that remaining in the deal would still be in Tehran's interests.

"In terms of economic return, I'm not entirely sure even this would be enough for Iran," Alcaro says, "but it certainly would win Iran's trust. And the Iranians may calculate that given the costs of risks associated with resuming the nuclear program, staying in the deal, keeping the moral high ground, keeping the United States isolated, seizing on the gap between Europe and America is still in Iran's best interest."

Vimont characterizes the U.S. effort as effectively pursuing an "economic embargo" against Iran, which might thoroughly test European resolve either way.

"[They could] refuse to go along with the U.S., which is what many of them have said already, and therefore they need to organize themselves accordingly -- but then, for them, it is admitting that they are now, at least on the economic side of this whole story, on for a confrontation with America," Vimont says.

"Would all 28 member states agree on such a course? That's the real question."

About the author:

Golnaz Esfandiari is a senior correspondent with Radio Free Europe/Radio Liberty. She can be reached at

... Payvand News - 05/16/18 ... --

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