If any doubt existed as to whether Europe and the US are on a collision course over Donald Trump’s plan to decimate Iran’s economy none existed by the close of August 7.
“Anyone doing business with Iran will NOT be doing business with the United States. I am asking for WORLD PEACE, nothing less!” tweeted the US president.
“We are encouraging small and medium enterprises in particular to increase business with and in Iran as part of something [that] for us is a security priority,” countered EU foreign policy chief Federica Mogherini, insisting the member states of the 28-nation European bloc would not let the Iran nuclear deal die.
The showdown between the EU and US has been in store since Trump in early May unilaterally pulled Washington out of the multilateral accord which relieved Tehran of crippling sanctions in return for compliance with measures designed to block its road to the possible development of a nuclear weapon. Instead of sticking with the nuclear deal, Trump opted for a new campaign of heavy sanctions with the objective of strangling the Iranian economy to the point where Tehran would have no choice but to renegotiate its role in the conflict-torn Middle East.
On August 6—again failing to explain what specific threat Shi’ite Muslim Iran poses to world peace as things stand or why it is that he singles out the Iranians for claimed terrorist activities when analysts typically trace the origins of most terrorism perpetrated against the West in recent decades to US ally Saudi Arabia or other Sunni Muslim nations—Trump triggered the first phase of those sanctions.
Trump described the first-phase sanctions—which hit Iran’s access to dollars, gold and precious metals and Iranian industries including carmaking—combined with second-phase sanctions that from November 4 will target Iran’s lifeline crude oil exports, as “the most biting ever imposed”.
As well as Iran, the EU’s big three—the UK, France and Germany—and Russia and China remained signed up to the nuclear deal, saying it works and Tehran remains in full compliance with it.
‘In our and the world’s security interests’
During a trip to Wellington, New Zealand, on August 7, Mogherini told reporters: “We are doing our best to keep Iran in the deal, to keep Iran benefiting from the economic benefits that the agreement brings to the people of Iran, because we believe this is in the security interests of not only our region but also of the world.
“If there is one piece of international agreements on nuclear non-proliferation that is delivering, it has to be maintained.”
Mogherini said it was crucial that Iran feels economic benefits secured by the nuclear deal. She described the late 2015 agreement struck after painstaking negotiations as a “fundamental aspect of the Iranian right to have an economic advantage in exchange for what they have done so far, which is being compliant with all their nuclear-related commitments”.
The Russian foreign ministry also put out a statement objecting to the US sanctions targeted at Tehran, reading: “We are deeply disappointed by US steps to reimpose its national sanctions against Iran. This is a clear example of Washington violating UN resolution 2231 [on the Iran deal] and international law.” The multi-party nuclear agreement had “shown its effectiveness” and the international community must “not allow such significant achievements in multilateral diplomacy to be sacrificed in the name of American aspirations to settle political scores with Iran”, the statement added.
Iran’s semi-official Tasnim news agency quoted Iran’s parliamentary speaker, Ali Larijani, as saying the country could actually benefit from the new sanctions by focusing efforts on an internal renovation of the economy. “By focusing on the domestic economy, reforming its structure and facilitating investment, the enemies cannot talk to Iran like that from now on because Iran’s resilience is increasing and this situation offers a good prospect for the country,” he reportedly said late on August 6.
SMEs urged to explore economy of 80mn
The EU appears to be trying to persuade largely small and medium sized enterprises (SMEs) that have no essential links to the US financial system or US markets or assets to stay in Iran, or move into Iran, to profit from vast opportunities offered in developing an economy with 80mn inhabitants. Many of the big European companies that do have US links—for instance energy major Total, carmakers Peugeot and Renault, oil, gas and petrochemical group OMV and, according to an announcement made on August 7, Daimler—have already announced continuing to do business with Iran is not viable under the current circumstances. But, thanks to a “blocking statute” announced by Brussels, many European companies of a far more modest scale might be able to pour into various opportunities.
The blocking statute seeks to protect EU-based firms in a commercial relationship with Iran against action from Washington.
Under the statute, European firms have been instructed that they should not comply with demands from the White House for them to drop all business with Iran. Those who nevertheless opt to pull out will need to obtain authorisation from the European Commission. Without an authorisation, they face the risk of being sued by EU member states. A mechanism has also been opened to allow EU businesses impacted by the sanctions to sue the US administration in the national courts of member states.
The EU is promising to unveil more measures to help secure continued nuclear deal benefits for Iran over coming months, but the Iranian centrists will need to see results to convince the hardliners that sticking with the accord is the best way forward.
One other move lately announced by the EU is the provision of a financing channel in Austria for trade with Iran, again mostly with SMEs in mind. But the limitations to the bloc’s efforts were last month shown when even its own lending arm, the Luxembourg-based European Investment Bank (EIB), baulked at moves by Brussels to persuade it to do business with Iran, arguing the funding it raises in the US would be under threat.
Iran, meanwhile, is working to protect its oil export markets in advance of the second-phase sanctions due in November. On August 5, the biggest buyer of Iranian oil, China, reportedly declined a request from Washington envoys to stop importing Iranian crude.