European diplomats warned the administration of US President Donald
Trump on Monday that Europe is prepared to block US efforts to reimpose
international sanctions against Iran, as long as Tehran continues to
comply with its obligations under the nuclear deal.
If the US pulls out of the nuclear agreement, known as the Joint
Comprehensive Plan of Action, and reapplies sanctions that target not
only Iran, but other countries who do business with Iran, the European
Union could take advantage of a statute dating back to the mid-1990s
that would protect European companies from being penalized under the
sanctions, EU Ambassador to the United States David O’Sullivan was
quoted as saying on Monday in a report by The Huffington Post.
Speaking at the Atlantic Center alongside French, British and German
ambassadors, Sullivan said, “We have the blocking statute ... which does
offer legal protection to European companies which are threatened by
the extraterritorial nature of US sanctions in certain circumstances.
“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.”
EU Interests, Stakes in Iran
Trade between Europe and Iran has seen a significant rise after the implementation of JCPOA in January 2016.
Latest data released by Luxembourg-based Directorate General of the
European Commission, Eurostat, show Iran’s trade with the European Union
topped €9.9 billion in the first half of 2017, registering a 95% rise
compared with last year’s corresponding period.
Iran’s exports to EU’s 28 nations exceeded $5 billion, indicating a
227% rise year-on-year. Petroleum, petroleum products and related
materials accounted for a majority of Iran’s exports to the EU during
the period, with a total value of €4.4 billion.
Italy was the biggest importer as it bought €1.54 billion worth of
Iranian goods during the period. France, Greece and Spain followed with
€1.26 billion, €638.5 million and €609.4 million worth of imports
Iran imported €4.94 billion worth of commodities from the European
Union during the same period, recording a %38.5 YOY rise. The imports
mainly included manufactured goods and chemicals.
Germany topped the list of exporters to Iran, shipping €1.39 billion
worth of goods to the Islamic Republic. Italy came second with €849.6
million and France followed with €763.7 million.
According to the European Commission, the EU exported over €8.2 billion
worth of goods to Iran in 2016, up 27.8% YOY and imported about €5.5
billion worth of goods from Iran, up 344.8% YOY.
Iran has become a popular destination for EU businesses, since the
nuclear deal and the ensuing lifting of sanctions. A deal was signed
between the UK and Iran earlier this month based on which British
renewable energy investor Quercus will invest over €500 million ($600
million) in a solar power project in Iran.
French automaker Renault signed a contract in August to set up a €660
million joint venture with Iranian firms for increasing car production
inside the country by 75%.
Earlier in July, French energy giant Total, together with Chinese
state-owned China National Petroleum Corp, signed a $5 billion deal with
Tehran to develop Phase 11 of Iran’s South Pars, the world’s largest
Deals with European companies include Swiss MECI Group International’s
agreement to build a €750-million wind farm in northern Iran, PSA
Peugeot Citroen’s joint venture contract with long-time partner Iran
Khodro to invest €400 million to upgrade the Iranian carmaker’s auto
plant as well as another agreement with local manufacturer SAIPA to
invest €300 million in five years in manufacturing and R&D, Airbus’s
contract with Iran to sell 100 jetliners worth about $19 billion at
list prices (three of which have been delivered so far) and
French-Italian planemaker ATR’s contract with flag carrier Iran Air
worth $536 million for purchase of 20 ATR turboprop aircraft (four of
which have been delivered so far and two more are expected to land
within a week’s time).
French construction firm Alstom’s agreement to manufacture 1,000 subway
wagons in Iran and Siemens AG’s contract worth at least €1.5 billion to
build rail coaches and upgrade tracks in Iran are among the major deals
Europeans have secured with the Islamic Republic after the nuclear
In what were the first finance deals clinched with European banks after
JCOPA’s implementation, Iran signed two agreements worth a total of
€1.5 billion ($1.8 billion) with Austria’s Oberbank and Denmark’s Danske
Bank on Thursday.
The first deal, worth €1 billion ($1.2 billion), was signed by 14
Iranian banks and the seventh-biggest bank of Austria that boasts a
balance sheet of roughly €20 billion ($24 billion). And the second deal,
worth €500 million ($600 million), was signed between 10 banks and the
longstanding Nordic lender Danske Bank.
US Sanctions Alone Ineffective
Because Washington has virtually no trade relations with Tehran, US
sanctions against Iran are not an effective nuclear deterrent unless
other countries join the effort.
In the years leading up to the 2015 nuclear deal, European countries,
as well as China and Russia, cooperated with US-led efforts to choke off
Iran’s economy in hopes of persuading Iran to negotiate restrictions on
its nuclear program. But now that Iran has scaled back its nuclear
program in exchange for sanctions relief, the countries that helped
negotiate JCPOA see no reason to cut off trade with Tehran again.
According to the Islamic Republic of Iran Customs Administration,
Iran’s trade with the US stood at about $387 million during the Iranian
fiscal year that ended on March 20, 2017. US exports accounted for about
$285 million of the sum.
IRICA’s latest statistics on bilateral trade show Iran exported $31.32
million worth of commodities to the US during the five months to August
22 and imported $72 million in return.
According to independent trade group US-Iran Chamber of Commerce, it is
estimated that sanctions on Iran cost the United States $203-271.8
billion in export revenues.
The warning from the EU ambassador came ahead of an Oct. 15 deadline,
when Trump has to inform to Congress whether Iran is complying with the
nuclear deal. That deadline is the result of legislation passed by
Congress in 2015 that requires the president to make several
certifications to lawmakers every 90 days.
Those certifications go beyond the technical requirements set forth in
JCPOA. One certification, for example, requires the president to confirm
that providing sanctions relief to Iran is “vital to the national
security interests” of the US.
The International Atomic Energy Agency, the organization tasked with
monitoring the use of nuclear technology, confirmed last month for the
eighth time that Iran was complying with JCPOA. But the subjective
nature of the reporting requirements in the law passed by Congress means
that Trump could opt to decertify Iranian compliance, even as the IAEA
says Tehran is fulfilling its obligations.
If Trump does not certify Iranian compliance, Congress has 60 days to
decide whether to fast-track legislation to reimpose nuclear sanctions, a
move that Iran would likely claim is a violation of the agreement.
European countries face an awkward situation if the US reimposes
sanctions against Iran without definitive evidence that Iran has
breached the nuclear deal. They will have to choose between breaking
publicly with a key ally or losing credibility by failing to honor a
Trump said last week that he had decided what he will do on Oct. 15,
but he’s keeping his decision a secret even to US allies who are party
to the agreement.
Amid this uncertainty, European diplomats have lobbied the Trump
administration and lawmakers to continue providing sanctions relief in
exchange for Iran abiding by strict caps on its nuclear program and
allowing intrusive IAEA inspections.
European diplomats were cautious on Monday not to criticize Trump, but
it was clear they were frustrated by his insistence that it would be
easy to reach a new agreement more favorable to the West.
“This was a multilateral agreement with difficult partners,” French
Ambassador to the US Gerard Araud said, referring to Iran, China and
Russia, whose national interests are often at odds with US and European
“Anybody who says we [could] get the perfect deal with those kinds of partners is just dreaming.”