After Trump’s Iran Decision: Time for Europe to Step Up

This article was originally published on the website of the European Council on Foreign Relations.

Despite months of E3-US negotiations to avert an unnecessary crisis over the Iran nuclear deal, President Trump has declared a hard exit from the nuclear agreement. The decision demonstrates that the US has decided that confrontation with Iran is both necessary and inevitable, regardless of what European allies think. The US administration looks set to increase tensions with Tehran and promote an implosion of Iran’s economy in ways that significantly increase risks of greater military escalation in the Middle East. Moreover, in the coming weeks, United States looks set to lead an economic and political assault on European interests.  

The E3 should now acknowledge that its negotiating tactic of accommodation and comprise with Trump has failed. If Europe is to have any influence forthcoming US policy on Iran, European governments should quickly shift tack, unifying behind a more assertive diplomatic strategy aimed at deterring the worst-case scenario of renewed Iranian nuclear program and more instability and violence in a region close to its borders. 

European governments are clearly tempted to think that the delays in implementation of sanctions mean they still have time to persuade the US president to reverse course. But the US president has acted on his promise to fully withdraw from the deal. He is now supported in that view by key advisors who have long advocated a forceful stand against Iran, not just on the nuclear deal but also in terms of encouraging regime change in Iran. It should now be abundantly clear that the current US administration cannot be a partner in salvaging the deal.

In this context the EU and its member states should now prioritize the following action points:

1. European leaders should use the forthcoming May 17 European Council meeting in Sofia to publicly and unanimously condemn the U.S. decision  to withdraw from a multilateral global security arrangement and place the responsibility for any instability that results on the Trump administration.
2. European leaders should reject further negotiation between the E3 and the US administration on a “broader framework” on Iran policy, including the prospect of further EU sanctions targeting Iran, until and unless the Trump administration makes significant adjustments to minimise the enforcement of US secondary sanctions targeting European companies doing business with Iran.
3. European governments should prioritise measures aimed at maintaining Iranian adherence the deal. The E3/EU should meet with Iranian counterparts at foreign ministerial level to agree on contingency plans. European governments should make a case to the Iranian government and public as to why the deal can be sustained and continue to serve Iran’s interest. This should emphasise the immediate economic benefits of continued oil exports (which Europe must vow to maintain as an priority). In this effort to entice Iran, Europe should cooperate with Russia and China, the other parties to the nuclear deal.
4. Europe’s approach should include the formulation of clear legal conditions for strategic sectors of trade with Iran aimed at protecting key European commercial deals seen as barometers of nuclear deal’s success and its ongoing survival (namely in the energy domain, aviation and automotive industries). The E3/EU should prioritise securing exemptions and waivers from enforcement of US secondary sanctions for European energy companies and related financial services to allow continued oil imports from and payments to Iran. Towards this end, EU member states should begin consultations regarding counter-measures against the United States. This should include political and legal threats that the EU will consider reviving the EU Blocking Regulation and even impose new penalties against assets of US companies based in Europe to allow for “claw-back” of unfair and illegal fines imposed on European companies doing business with Iran. European leaders should press this issue very hard with the Trump administration, making clear that this is a critical issue for the transatlantic relationship, as well as ongoing cooperation on regional issues in the Middle East.
5. European governments should also look to find bridging solutions to maintain banking connections with Iran even if at far reduced levels, including by temporarily connecting respective central banks in EU member states to the Central Bank of Iran and creating emergency export credit lines. The EU EAS should accelerate coordination among leading member states, their export credit agencies and state-owned banks to devise novel banking mechanisms allowing a degree of risk-sharing between governments and the financial sector on business with Iran. This effort should aim to facilitate a pan-European approach towards creating special purpose vehicles to finance sector-specific trade and investment with Iran. The EU EEAS should also advance existing proposals for the European Investment Bank to become a lending bank for long-term and medium-sized investments inside Iran.
6. It will now be more critical than ever for Europeans to maintain a dialogue with Iran on regional and ballistic missile issues, given that the US exit from the nuclear deal is already feeding wider regional escalation. This is particularly true given that the Trump administration is likely to work with its key regional allies to accompany the nuclear agreement withdrawal with a wider push against Iran. Germany, France, the UK and Italy should accelerate and formalise recently launched regional talks with Iran, including efforts to advance de-escalation possibilities between Iran and Israel in Syria where the situation is becoming increasingly febrile.

In the end, Europe may not be capable of salvaging the nuclear deal. But if the Europeans want to promote non-proliferation in the region and reduce regional instability, they need to demonstrate to the Americans, the Iranians and others that they are willing to try. Allowing the collapse of the nuclear deal without a proper fight will have immediate and disastrous consequences in the Middle East, while also significantly reducing European relevance on global security. Europe faces a critical and historic choice and must demonstrate its political will to advance its security interests through robust diplomacy.

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Trump's Unequivocal Iran Deal Withdrawal Was the Best Outcome for Iran

President Trump has violated the Joint Comprehensive Plan of Action and withdrawn from a landmark arms control agreement that enjoyed broad international support. Crucially, he did so more decisively than many expected. In his televised announcement on Tuesday, Trump clearly relished the opportunity to follow through on his campaign promise to “rip up” the Iran nuclear deal, declaring, “The United States no longer makes empty threats. When I make promises, I keep them.”

There is no doubt that the JCPOA is in jeopardy. But the deal has been in jeopardy for a long time. New polling data from IranPoll, drawing on a nationally representative survey of Iranians conducted between April 13-17 and released on May 8 at a Bourse & Bazaar round table in Stockholm, illustrates this point. When asked how confident they are that the “United States will live up to its obligations toward the nuclear agreement,” a resounding 92 percent of Iranians indicated that they lacked confidence, up dramatically from 41 percent in September 2015. Iranians consider U.S. violations of the deal to have been indisputable, even prior to today’s announcement.

The real question is whether the decisiveness with which Trump discarded three months of negotiations with the E3 on a “fix” to the Iran deal will change political perceptions in Europe. European leaders may have be tempted to latch onto any ambiguity in the extent of the U.S. withdrawal, for example had Trump pursued the reapplication of sanctions without immediate enforcement. Over the last few months, France, Germany, and the United Kingdom have proven reluctant to take a robust stance vis-a-vis the United States’ unilateral demands for the renegotiation of the JCPOA. Unsurprisingly, the E3 negotiating strategy was lambasted as one of “appeasement” by Tehran.

The significant and very public investment of political capital in trying to convince Trump to remain in the deal, which saw Macron and Merkel make visits to Washington, as well as British foreign secretary Boris Johnson, meant that an admission of defeat would always have been unlikely. Had Trump taken a more muddled stance on the future of the United States as a party to the nuclear deal, it is not difficult to image that the E3 would have “welcomed” certain aspects of Trump’s relevant announcement.

But there was no muddling on Tuesday. As per the White House statement, Trump “has directed his Administration to immediately begin the process of re-imposing sanctions related to the JCPOA” with the aim of targeting “critical sectors of Iran’s economy, such as its energy, petrochemical, and financial sectors.” The implementation memo shared with the Secretary of State, Secretary of Treasury, and other key actors within the executive branch makes the detail of the impending actions even more clear.

Responding to Trump’s bold move, the joint statement from Macron, Merkel, and May calls for “the US to ensure that the structures of the JCPOA can remain intact, and to avoid taking action which obstructs its full implementation by all other parties to the deal.” Moreover, the statement declares that the E3 will “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 from European Union High Representative Federica Mogherini further declares the importance of protecting trade and investment, stressing that “The lifting of nuclear related sanctions is an essential part of the agreement” and “that the lifting of nuclear related sanctions has not only a positive impact on trade and economic relations with Iran, but also and mainly crucial benefits for the Iranian people. The European Union is fully committed to ensuring that this continues to be delivered on.”

Bold statements beget bold statements and European governments are growing increasingly confident in signaling their willingness to protect channels for trade and investment with Iran. However, signaling will need to be followed-up by action. Again, the decisiveness of Trump’s move on Tuesday will probably help ensure that practical measures are pursued in earnest.

The clear failure of the E3 negotiating strategy will likely see the mantle of leadership on Europe-Iran relations return to Mogherini and the European External Action Service. This will happen first and foremost with the convening of the Joint Commission of the JCPOA which is expected in the coming week. Mogherini’s position draws on the foreign policy consensus of the EU’s 28 member state governments. With the policy debate once again expanded to this wider group, the input of the governments of Sweden, Austria, Italy, and the Netherlands, among other countries, will become more influential as Europe seeks to preserve the JCPOA’s economic benefits and keep Iran in the deal. Importantly, these smaller member states are those which have made the most progress in devising special financial vehicles, concluding export credit agreements, and encouraging banks to engage in the Iranian market in adverse conditions. In short, Trump’s rebuke of the E3 can restore the mantle of JCPOA engagement to the wider EU—an outcome that is good for Iran.

Moreover, in taking itself out of the deal, the Trump administration may have actually limited the damage it can do to the legal environment for trade and investment in Iran. Administration officials have confirmed that the United States will not pursue the snapback of UN sanctions lifted as part of United Nations Security Council resolution 2231, which enshrined the JCPOA in international law. As the United States is out of the deal, they no longer have the right to trigger such a vote as per Article 37 of the JCPOA. So while the White House has announced a full snapback of U.S. primary and secondary sanctions eased under the nuclear deal, European and Iranian commercial actors can take some comfort that EU and UN sanctions will not snapback (so long as Iran continues to abide by its commitments under the deal).

Finally, and perhaps most importantly, the nature of Trump’s withdrawal will impact public opinion in Iran. For President Rouhani, there will be great pressure to retaliate in order to prove that Iran cannot be bullied by the United States. This pressure is coming not just from hardliners, but from the general public as well.

When asked whether Iran should “retaliate” or “continue to live by the JCPOA” in the event that “the United States takes measures against Iran that are in violation of the JCPOA agreement,” 67 percent of Iranians believe that Iran should retaliate. Just 31 percent believe that Iran should stick with its commitments under the deal. The proportion of Iranians calling for retaliation has risen 8 percent in the past three months, which corresponds precisely to the period in which the E3 launched its attempt to fix the deal by placating Trump. The political consequences of that strategy are starkly exhibited in the new polling.

Yet, the undeniably aggressive nature of Trump’s move may actually serve to inspire Iranians to choose resilience over retaliation. Resilience is what has made Iran one of the world’s twenty largest economies despite enduring both a decade of war and a decade of sanctions in just the last forty years. In his address to the nation, Rouhani described Trump's decision as "an act of psychological warfare against Iran.” The Iranian response to this psychological warfare will be determined following consultations with the remaining parties in the JCPOA. If the Rouhani administration can credibly demonstrate to the public that there is a plan for principled defiance, and if that plan includes clear commitments from Europe to protect Iran’s economic prospects, it remains possible for Iran to remain in the deal. If this can be achieved, following such a direct attempt by Trump to kill the deal, Iran will reassert its strength in a remarkable way. Cooperative resilience, not retaliation, must prevail. Defying Trump must be the rallying cry. 

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