Europe Is Running Out of Time to Save the Iran Deal
After initiating a dispute resolution process, European leaders have a limited window to provide Iran with meaningful economic relief and seek to reduce tensions between Tehran and Washington.
Iran is growing frustrated with European leaders’ inability to reciprocate its nuclear concessions in the face of U.S. obstructionism. Hassan Rouhani continues to urge Supreme Leader Ali Khamenei to grant more time for negotiations with France, Britain, and Germany that Khamenei believes are futile. Washington’s maximalist policy of seeking zero uranium enrichment capacity in Iran has thwarted an even minimal chance of a diplomatic breakthrough.
The story may sound familiar, but all of that happened in 2005.
Iran had suspended its uranium enrichment program in the hope that Europe would offer it some tangible economic incentives; at the time, Rouhani—now Iran’s president—was Tehran’s chief nuclear negotiator. But John Bolton, then serving at the U.S. State Department, impeded the Europeans’ efforts. Iran ultimately broke the seals on its nuclear program, significantly ramped it up, and triggered a perilous, nearly decadelong race pitting sanctions against centrifuges.
Fifteen years later, history is repeating itself.
The Trump administration withdrew from the 2015 Iran nuclear deal—negotiated by Obama administration diplomats along with Iran, France, Britain, Germany, the European Union, Russia, and China—in May 2018. Pursuing a policy of maximum pressure, the administration imposed stifling sanctions on Iran, inflicting grave harm on the country’s economy and its people.
Once again, Europe tried to salvage the agreement. It promised to maintain and expand economic cooperation with Iran in areas such as energy, transportation, investments, and banking—the dividends envisioned by the nuclear deal in return for Iran muzzling its nuclear program.
Yet trade between Iran and Europe fell substantially. Trade figures for the period between January and August 2019 showed a drop of 94 percent in Iranian exports to Europe compared to the same period in 2018, while imports more than halved.
In an effort to offset the impact of U.S. sanctions, the European powers jointly unveiled a special-purpose vehicle, the Instrument in Support of Trade Exchanges (Instex), in January 2019 to encourage companies to do business with Iran, with an emphasis “on the sectors most essential to the Iranian population—such as pharmaceutical, medical devices and agri-food goods.” Getting the mechanism up and running, however, has been a halting exercise. While six more European countries signed on to Instex as shareholders in November 2019, the first batch of transactions has yet to come through.
Other European efforts, too, came to naught. The European Commission mandated that the EU’s main investment bank invest in Iran, but the latter refused to do so out of fear of losing access to U.S. capital markets due to U.S. sanctions. In 2018, the EU also reinstated its blocking statute—prohibiting European companies from complying with such secondary U.S. sanctions. But there have only been a handful of cases in Europe where courts enforced blocking regulations to restore trade with Iran, and the law’s application remains rare and inconsistent.
To compel Europe to do more and throw Iran an economic lifeline, Tehran started a staggered process of loosening its nuclear deal commitments in May 2019, while at every step reminding the EU that it was willing to return to full compliance as long as European governments delivered the promised financial dividends. Five 60-day ultimatums later, after Iran shed all the deal’s restrictions on its enrichment capacity, on Jan. 14, European leaders did the opposite of what Tehran had hoped for: They triggered the agreement’s dispute resolution mechanism.
This could result in the return of U.N. sanctions on Iran within 65 days. While British, French, and German officials are at pains to claim that this is not a first step toward reimposition of U.N. sanctions, failure to resolve the dispute in the allotted time would make such an outcome increasingly inevitable. The United States seems keen to accelerate this outcome, with Treasury Secretary Steven Mnuchin asserting on Wednesday that “we look forward to working with [those three countries] quickly and would expect that the U.N. sanctions will snap back into place.”
This would spell the demise of the nuclear deal. Indeed, Iran has warned that the so-called snapback of U.N. sanctions, which would recategorize Iran as a threat to international peace and security under the U.N. Charter’s Chapter XII, would constitute a red line, prompting it to withdraw from not just the nuclear deal but also the Nuclear Non-Proliferation Treaty—blinding inspections, reviving talk of U.S. or Israeli military strikes, and moving the baseline for future negotiations.
For Tehran, distrust of the U.S. government is a long-standing dictum. But the experience of negotiating a nuclear accord may also leave Iran with the impression that Europe, keen to hail the deal but doing little in practice to save it, is strategically feckless. The European focus on punishing Iran for its noncompliance, while only expressing regret over the original sin of the U.S. withdrawal from the deal, could have long-term adverse consequences for Iran’s relations with Europe.
Khamenei, an ardent foe of the United States, has adopted a harsh tone about the Europeans, characterizing them as unreliable at best and a good cop to Washington’s bad cop at worst. Such rhetoric has rendered it difficult for those officials within Iran most eager for engagement with the West to make their case and instead prompted them to lament Europe’s dithering—or worse.
Western-educated Iranian officials now increasingly sound like hard-liners. Rouhani, the Scottish-educated Iranian president, implicitly threatened European troops in the region in case of further escalation. Iran’s U.S.-educated foreign minister, Mohammad Javad Zarif, scolded Europe on Twitter for allowing the United States to bully it. Ali Akbar Salehi, the Massachusetts Institute of Technology graduate who heads the Atomic Energy Organization of Iran, said California has more sovereignty than the 28 European Union member states combined.
Undoubtedly, this has domestic political implications. Iran has parliamentary elections scheduled for Feb. 21. None of the pro-engagement Iranian politicians stand a real chance of either surviving the system’s vetting process or being elected in the face of the hard-liners, who have been proven right in being skeptical of the West and its intentions and are now advocating a much more confrontational policy. With the parliament lost to the hard-liners, Rouhani will likely become a lame duck president prematurely.
This, too, is déjà vu. The more moderate forces in Iranian politics lost the parliamentary elections to the hard-liners in 2004, paving the way for the hard-line presidency of Mahmoud Ahmadinejad, who presided over one of the worst periods in Iran’s relations with Europe.
All of this could still be avoided if Europe uses the time and space created by the dispute resolution mechanism to find ways to either provide Iran with meaningful economic relief, even if that provokes Washington’s ire, or to mediate between Tehran and Washington to de-escalate tensions. The alternative is the poisoning of Iran’s relations with Europe—and the collapse of an agreement that Europe hails as a diplomatic achievement but has failed to salvage.