The “America First” doctrine proclaimed by the Trump administration has sent relations between Washington and its traditional allies in Europe on a journey into the unknown. With a critical deadline, with international implications, approaching in the coming days, this relationship may face a watershed moment. Every 90 days, the American president is required to certify Iran’s compliance with the Joint Comprehensive Plan of Action (JCPOA), commonly known as the Iran nuclear deal, to Congress. The next deadline is October 12, 2017. According to news reports, Donald Trump is widely expected to announce Iran to be noncompliant with the agreement.
On numerous occasions, the president has reiterated his disdain for the agreement, which was struck between the Islamic Republic of Iran and six major world powers in 2015, calling it “stupid,” “a disgrace,” and, perhaps most infamously, “the worst deal ever negotiated.” This rhetoric reached a fever pitch during Trump’s fiery speech before the UN General Assembly last month in New York, where he took unmistakably clear aim both at Iran and the multilateral accord. The Iran deal, Trump bellowed, “is an embarrassment to the United States.” Amidst this bluster, the future of the JCPOA appears less than clear. How Europe responds will be critical.
Between a Rock and a Hard Place
The prospect of revitalized trade relations with Europe and the possibility for major European investment into Iran’s economy were major incentives for the Iranian government to curb its nuclear program. European commitment to the deal is, as such, central to its continued viability. The JCPOA is also one of the EU’s defining diplomatic achievements, affirming its status as an influential actor on the international stage. It is not surprise, then, that European state leaders and top diplomats have unanimously expressed their continued support for the nuclear agreement.
If the United States unilaterally turns its back on the JCPOA, however, many European governments will find themselves trapped between a rock and a hard place. On the one hand, Great Britain, France, and Germany were parties to the negotiations and are signatories to the deal. The European Union led the negotiations, endorsed the deal, and is largely responsible for its official implementation. On the other hand, defying the U.S. administration could seriously disrupt relations between Europe and its decades-old ally. At the same time, caving to American posturing, pressure, and propaganda risks the EU’s international credibility.
Mixed Signals from the Trump Administration
Whether the Trump administration truly wants to rip up the deal or is clumsily attempting to use de-certification as a tactical move is not entirely clear. Thanks to internal divisions within the Trump administration, U.S. officials have sent contradictory signals to friends and enemies alike.
It is important to note, nevertheless, that de-certifying Iran’s compliance with the nuclear deal would not automatically trigger U.S. withdrawal from the agreement. Under U.S. law, Congress would have 60 days to determine whether it will re-impose nuclear sanctions, lifted under the JCPOA’s framework.
Under one possible scenario, Trump could use de-certification to lay out a new Iran strategy to try and convince Congress to re-impose nuclear sanctions. This tactic would involve aggressively countering Iran’s foreign policy interests in the region, as well as the country’s ballistic missile program, neither of which are covered by the JCPOA. Indeed, it would not be difficult to convince Congressional members, who are already reflexively antagonistic toward Iran, to support de-certification on the grounds that Iran is violating the “spirit” of the deal, despite its consistent and continued compliance. Under this approach, there would be additional non-nuclear sanctions and a tougher line against the Iranian Revolutionary Guard Corps, which is viewed as the driving force behind Iran’s missile development and involvement in Iraq, Syria, Lebanon, and, allegedly, Yemen.
While the Europeans are also concerned about Iran’s role in the Middle East, they have indicated a desire to tackle these issues through diplomatic means, and have offered to coordinate their efforts with the United States in this regard. They have also consistently expressed disapproval of and disinterest in renegotiating the deal or jeopardizing its survival. As EU foreign policy chief Federica Mogherini said on September 20, following a ministerial meeting between Iran and the P5+1 held on the sidelines of the UN General Assembly in New York, “The agreement is working and is delivering for its purpose.”
With the expectation that the Europeans are responsible for preserving the nuclear deal, Iran’s foreign minister, Mohammad Javad Zarif, said that, in case of a U.S. withdrawal from the JCPOA, Iran would continue to abide by the agreement only if the remaining signatories – China, France, Germany, Russia, and the UK – also adhered to the terms of the deal and refused to comply with any sanctions re-imposed by the United States
The EU’s Options
Though prospects for altering the course of the Trump administration’s Iran policy look increasingly dim, the Europeans have continued lobbying efforts to persuade the U.S. administration and members of Congress not to abandon the agreement.
Considering the circumstances, however, Europe is weighing its options on how to respond to a full U.S. withdrawal, as well as attempts by the U.S. government to obtain European support for a tougher stance against Iran.
On September 25, 2017, at an event in Washington D.C. with fellow ambassadors from Germany, France, and the UK, the EU’s envoy to the United States, David O’Sullivan, hinted at possible EU countermeasures to renewed nuclear sanctions. Addressing the possibility that the U.S. may walk away from the nuclear deal, O’Sullivan noted, “I have no doubt that if this scenario materializes, which it’s not clear it will, the European Union will act to protect the legitimate interests of our companies with all the means at our disposal,” as reported by the Huffington Post. Specifically, O’Sullivan referred to EU Council Regulation 2771/96, which states that extraterritorial U.S. laws are unenforceable in the EU. This “blocking statute” was developed in response to the U.S. government’s Cuban Liberty and Democratic Solidarity Act passed in 1996, as well as the Iran-Libya Sanctions Act introduced later that same year.
Despite the EU Council Regulation, there are exceptions for cases where non-compliance with U.S. law will likely do serious harm to European companies. Because of the global financial importance of New York City and the U.S. dollar’s role as the world’s de facto currency, it is very difficult for international corporations and banks, particularly those with business interests in the United States, to evade the long arm of U.S. law. In recent years, American authorities have been particularly severe in penalizing various financial institutions, including European ones, for alleged violations of U.S. sanctions. The most prominent, recent case was that of the French bank, BNP Paribas, which pled guilty in 2014, to laundering money for the sanctioned countries of Sudan, Iran, and Cuba. The bank agreed to pay a fine of $8.9 billion and was banned from conducting certain U.S. dollar transactions for a one-year-period.
These prosecutions have been so successful as a deterrent that there has been a tendency for over-compliance. Iranian authorities have repeatedly complained, for example, about European banks shying away from business deals even though JCPOA lifted some of the sanctions.
Fears of being prosecuted by the U.S. government are not confined to the banking sector alone. Except for the French multinational, Total, European oil companies operating in the United States have been cautious about investing in Iran’s energy sector, out of concern for their business interests in the United States. Although major European car manufacturers have increased trade with Iran, since the JCPOA’s implementation, those with significant market share in the United States would face severe penalties for their Iranian business activities, if nuclear sanctions were re-imposed. These punitive measures could range from financial restrictions to denial of U.S. visas or export licenses, as well as an import ban.
Finding a Face-Saving Compromise
While such deliberations point to a worst-case scenario, the Europeans may be confronted with other obstacles, in the event of Trump’s likely de-certification, even if nuclear sanctions are not re-imposed.
The political chaos that would follow de-certification would cause much confusion and uncertainty, and seriously affect the business climate and trade with Iran. In order to reassure European companies that doing business with Iran is secure, the EU may have to develop new legislation to better protect European business interests from outside pressure.
In exchange for continued U.S. support for some deal with Iran, Iran hawks in Washington, especially within the Republican Party, may demand European support for a tougher approach towards Tehran, with respect to its alleged regional ambitions, support for militant and resistance groups, human rights record, and missile program. Under these circumstances, demands for additional EU non-nuclear sanctions may be difficult to refuse. Europe could find itself struggling to adequately respond to such a scenario, as it may deliver a devastating blow to the JCPOA, either way.
Other problems could arise, as well. For instance, if the Iranians file a complaint to the joint commission of the JCPOA, in response to Trump’s de-certification, the Europeans and other signatories to the agreement would have to determine whether the de-certification itself violates the JCPOA. The International Atomic Energy Agency (IAEA), the organization responsible for verifying that Iran is satisfying its nuclear commitments, already announced the Islamic Republic’s continued compliance with the deal in late August. Despite growing differences with the U.S. position, the Europeans certainly will not want to offend their key global partner by publicly suggesting it is an untrustworthy and erratic deal-breaker.
In the end, the EU and its member states will have to find a face-saving compromise with an increasingly volatile administration in Washington. In the near future, stark choices and tough negotiations are likely in store to preserve European interests in Iran.