Europe ponders the US Iran nuclear deal threats over its companies

EU foreign policy chief Federica Mogherini (L) speak during a joint press conference with Iranian foreign minister Mohammad Javad Zarif (R), Tehran, Iran, 16 April 2016. [EPA/STRINGER]

Europe has to decide what to do in case the US makes good on its threat to withdraw from the Iran nuclear deal and re-impose sanctions on Iran. The alternative is to agree to tighter terms proposed by Washington that could hit European companies.

The EU says it fully supports the nuclear deal and some analysts and MEPs say it should not cave in to pressure from Washington. Others, however, say it should comply with demands from its biggest security partner.

In light of growing concerns in the business community, an EU spokesperson told EURACTIV.com that the bloc always seeks to protect the interests of its companies.

“We would not speculate about hypothetical situations. The EU always seeks to protect the legitimate interests of its economic operators,” the spokesperson said when asked whether the bloc has a contingency plan to protect European investors if Washington ultimately decides to pull out of the deal reached in July 2015.

After almost two years of delicate negotiations, China, France, Russia, the UK, US and Germany and the EU – known as the P5+1 – agreed with Tehran in Vienna on the Joint Comprehensive Plan of Action (JCPOA) to rein in Iran’s nuclear programme in exchange for relief from nuclear-related economic sanctions.

But the Trump administration has called the deal an “embarrassment” that is not in the US national interest and needs to be “corrected”.

“This is the last chance… I hereby call on key European countries to join with the United States in fixing significant flaws in the deal, countering Iranian aggression, and supporting the Iranian people. If other nations fail to act during this time, I will terminate our deal with Iran,” the US president warned last month.

“If Iran does not comply with any of these [new] provisions, American nuclear sanctions would automatically resume.”

For its part, the EU has stated it will remain “fully committed” to implementing the nuclear deal. Brussels has stood by the International Atomic Energy Agency (IAEA), which has conducted numerous inspections in Iran and said that the country has complied with all its commitments.

“It is a deal that prevented a nuclear arms race in the Middle East, next to us. That brought security in the region and to young people in the country. That was the European way and it was thanks to us because we were the mediator,” EU foreign policy chief Federica Mogherini  said recently.

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But the EU business sector is anxious that American sanctions would affect EU companies that operate in Iran and also have commercial activities in the US.

EU businesses worried

Luisa Santos, director for international relations at BusinessEurope, which represents EU-based enterprises, said that the business community backs the nuclear deal.

“If one of the partners decides to consider putting into question that agreement, therefore deciding on additional sanctions on Iran that do not take into account what the other partners are doing, that creates a problem for us,” Santos said.

She added that the problem lies in the extraterritorial nature of the US sanctions, under which companies that are in any way involved with the US might be affected even if the EU maintains the current situation.

“It’s a factor of risk that we have to take into account,” she insisted.

Need for contingency planning

According to Steven Blockmans, the head of EU foreign policy at the Centre for European Policy Studies (CEPS), the EU will be “forced” to act independently of the US on JCPOA.

“Just like it had to do when the US walked away from the Paris climate agreement, UNESCO, and the Middle East peace process by recognising Jerusalem as the capital of Israel,” said Blockmans.

Blockmans noted that the EU institutions, France, Germany and the UK should stand firm in support of the principle of ‘pacta sunt servanda’, one of the cornerstones of international law.

“The EU should remind the US that it should stick to its own commitments and not undermine the authority of the UN Security Council, which signed off on the nuclear deal by including the text in an annex to a legally binding resolution.”

As for the economic implications, Blockmans stressed that if and when new US sanctions come into effect, EU companies will face a binary choice: doing business in Iran or continuing operations with a US dimension.

“Without European protection of their investments against the long arm of US sanctions, companies are likely to stop trading with Iran. This is not in the interest of the EU and its member states. They should, therefore, start contingency planning,” the CEPS expert said.

The same view is shared by Knut Fleckenstein, the vice-president of the Socialists and Democrats in the European Parliament, who believes that the bloc must be prepared for US foreign policy priorities to have an impact on European policy.

“The EU definitely needs a ‘plan B’ to protect EU companies in this worst-case scenario. It is the Commission’s duty to prepare such a plan and to have it ready to hand when needed. Of course, I hope the plan never needs to be applied and that President Trump re-thinks his current approach.”

The German MEP stressed the deal’s significance for security in the region, as well as in Europe, but warned that the EU has its eyes closed to what is currently happening in Iran.

“It must not be ‘either/or’ but ‘both’. We need progress on human rights issues and a fully implemented nuclear deal that has already been proven to be successful. However, Iran-related concerns lie outside the JCPOA and should be addressed separately and in the regional context.”

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EU should listen to America

But not all agree with this approach. The Wilfried Martens Centre for European Studies, the official think tank of the centre-right European People’s Party (EPP), takes a different view on the issue, saying that the EU should understand the “rightful concerns” voiced by the US Congress.

Roland Freudenstein, a policy director at the centre, said there are some deep flaws in the current nuclear deal, which have been identified by Washington.

“Verification of Iranian compliance is not assured, and Iran’s race to a nuclear capability has been merely slowed down a bit. Besides, the deal does not cover Iranian development of missile systems and other weaponry, not to mention Iran’s worldwide export of terrorism,” Freudenstein noted.

For these reasons, says Freudenstein, the EU should work with the Americans on a unified position on how to correct these flaws or impose new sanctions on Iran.

“And no one in Brussels should encourage European companies to do business with a regime that sends spies to Europe to prepare to kill Jews (as was the case in Germany) and is responsible for massive war crimes in Syria.”

Freudenstein went further, stating that the US is a NATO ally guaranteeing Europe’s security against very real conventional and nuclear threats.

“And for decades to come, Europe will not be able to deter enemies and defend its territory in the same manner. So we should ask ourselves why Americans should continue to defend us if we openly oppose them in crucial questions of international security – especially our own security, in the case of Iran,” he added.

“I don’t think we’re hostages, we just need to be a little less lecturing vis-à-vis the Americans and instead try to work out a common position. And we certainly shouldn’t consider the Mullahs in Tehran our friends, however ‘moderate’ they try to appear. They’ve just been shown the finger by their own people.”

Is there a middle solution?

In an op-ed published by EURACTIV on Friday (2 February), Elmar Brok, a centre-right MEP and close ally of Chancellor Angela Merkel, said the EU should follow a dual strategy on the issue.

“On the one hand, we must do our best to preserve the nuclear deal and keep up talks. On the other hand, we must clearly point at any violation of human rights,” Brok said.

The German politician also admitted that the lifting of nuclear-related sanctions had a positive impact on trade and economic relations with Iran.

But he made it clear that the EU would never accept the Iranian fight against the Jewish state of Israel, the Iranian missile programme, the meddling in the proxy wars in Yemen, Iraq, and Syria, or its policy in Lebanon.

Why the EU needs a dual strategy for Iran

After a series of violent protests in Iran against the government, the European Union must do its best to preserve the nuclear deal while simultaneously point out the violation of human rights as part of a dual strategy, argues Elmar Brok.

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