Can Europe Persuade Iran to Remain in the Nuclear Deal?

Saturday, August 4, 2018

Somaye Morovati
During the past two years, Iran's relations with the outside world had been divided into pre- and post-JCPOA eras and now they are defined on the basis of the date when US President Donald Trump decided to withdraw from the nuclear deal with Iran, known as the Joint Comprehensive Plan of Action (JCPOA). Trump's decision to withdraw from the JCPOA caused both minor and major changes in Iran's policies with regard to all domestic and foreign matters. Due to developments that ensued this issue, there were rumors that in the coming weeks, Tehran would declare whether it would remain in or leave the nuclear deal. Iran's Foreign Minister Mohammad Javad Zarif and his deputy, Abbas Araqchi, have already announced in response to these speculations that the Islamic Republic cannot wait forever to see what decisions other signatories to the JCPOA will make. They added that if pressures on Iran continue to increase and European countries fail to find a solution to prevent Iran's withdrawal from the JCPOA, the Islamic Republic would certainly act on the basis of its interests and may quit the nuclear accord.

When Trump officially announced in early May that the United States would withdraw from the nuclear deal with Iran and re-impose the highest level of economic sanctions against the country, he in fact faced other parties to the deal with the option of choosing between standing by or against the United States. Of course, the United States’ unilateral sanctions will be reinforced on August 6 and November 4 to cover certain sectors of Iran's economy, especially it oil sales. At that time, all companies that trade with Iran will be banned from doing business with the United States. According to the United States’ secondary sanctions, financial institutions and those banks, which transact with Iran, would have no access to the United States’ financial markets. However, what happened in reality was slow, but continuous, withdrawal of foreign companies and investors from Iran and restriction of Iran's diplomatic relations with other countries. Although other signatories to the JCPOA are apparently with Iran and encourage the country to keep implementing the JCPOA under these conditions, they have taken no practical steps to offer Tehran with support for its future policies. Therefore, Araqchi clearly noted that from Iran's viewpoint, the JCPOA was dying and if other signatories were committed to it, they should reduce the costs of Iran's commitment to it and give voice to their support for Tehran.

If we consider Araqchi’s remarks as expressive of an Iranian approach to the future outlook of the JCPOA, this approach does not believe in the survival of the JCPOA while sanctions remain in place. Therefore, European countries must leave their defensive position and take a final decision to restore trust of the Iranian society. Iran has called for continuation of monetary transactions, return of foreign companies and investors, continuation of oil sales and termination of its international isolation and it expects Europe to offer a solution in this regard. Araqchi, therefore, has announced that Iran is waiting for Europe’s package of proposals, adding that any decision to remain in or exit the JCPOA by Iran would be taken on the basis of that package and Iran's interests.

The United States and the European Union have highlighted four basic issues with regard to Iran: Iran's missile program, its regional policies, inspection of Iranian institutions, and changes in some articles of the JCPOA. The important point is that Europe stands by the United States with regard to the first three issues while the two sides have so far failed to reach an agreement on how to change the contents of the JCPOA. Europeans believe that changing the contents of the JCPOA would not be possible without Iran's consent and if done, it would be faced with Iran's practical response given the fact that Iran has never violated the contents of the nuclear deal.

Iran expects Europeans to provide conditions for secure life in the country in any way they can, because its commitment to the JCPOA provided Europeans with a relative advantage during negotiations and after conclusion of the JCPOA, but it has only entailed costs for Iran. Everybody is now preoccupied with speculations about the contents of Europe’s package of proposals. However, it must be accepted that major French or German companies are independent of their governments although their governments can have some leverage over their decisions. However, when it comes to signing contracts, existence of secure conditions for investment in a third country, diplomatic support, and so forth, it is those companies, which will finally have to decide whether stay in Iran and pay the price of opposing the United States or not. Expecting, for example, the French government to provide support for Total against possible US sanctions does not mean that it can have any effect on reducing or increasing the risk of Total’s future investment in the United States and its allied countries. This point is often ignored in many analyses and they forget that financial capital acts independently with its priority being the highest profit against the lowest risk while staying away from political games as much as possible.

Iran, in the meantime, will have two scenarios to choose from. In the first scenario, Iran's views are met in Europe’s proposed package and this will lead to continued commitment of Iran to the JCPOA, while in the second scenario, proposals made by Europeans would not be attractive and Iran would leave the JCPOA. Every one of these scenarios will have different consequences for Iran, the region and the world. For example, if the JCPOA is terminated, a number of options will be available to Iran, which will also concern the United States. They include: 1. ending all commitments accepted by Iran under the JCPOA; 2. asymmetrical measures by Iran against American forces and their allies in the region; 3. making an effort to find new markets and new ways to transfer money; 4. and the fourth option, which can be Iran's harshest response, is to leave the Non-Proliferation Treaty (NPT). 

The degree to which these options seem realistic or pessimistic would depend on Iran's domestic conditions and developments and the degree to which sanctions and flight of internal and external capital would make it difficult for the government to work and force it to show sharp reactions.

The JCPOA is considered as a special advantage for Europe and this is why many believe that the European Union will do its best to preserve it. Sending the message of “a Europe that protects peace and stability” is a dream that the European foreign policy has been trying to make come true for many years and the JCPOA and its survival are now the biggest challenges facing realization of this dream. Europe has a number of possible options to choose from. Taking advantage of supportive laws such as the blocking regulation to support investors that remain in the Iranian market and may be harmed by US sanctions and increasing tariffs on US exports to Europe to make up for the loss of European companies affected by US sanctions are a few of them. However, the most important preoccupation of big and small companies and their governments is how to transfer money. Some of them have proposed establishment of an independent bank with no financial transaction with the United States, which would only deal with Iran. This proposal has been offered to Germany’s Deutsche Bank, which had already been fined in previous years for cooperation with Iran during the period of sanctions.

The important point, however, is that Iran will never trust Europe through presence of small investors and offering of support proposals that lack actual backing. Now that Iran's economy is facing such problems as public distress, flight of domestic and foreign capital, and some inefficiencies in management, the country needs serious support that would allow it to sell oil, do business, attract domestic investment in the country’s infrastructure and get out of the current state of isolation. The sign of that isolation was evident in the recent OPEC meeting during which Russia and Saudi Arabia decided to boost their petroleum production despite Iran's opposition. Right or wrong, Iran considers the current conditions and developments that happen one after the other as being against it and if this understanding becomes rife among Iranian politicians, it can have grave consequences and entail heavy costs for Iran, the region and the entire world.


*Photo CreditKyodonews

*These views represent those of the author and are not necessarily Iran Review's viewpoints.