New Dynamic in Iran's European Ties

Friday, June 28, 2013

Kaveh L. Afrasiabi

The election of moderate cleric Hassan Rouhani as Iran's new president sets the stage for fresh thinking on the troubled relationship between Iran and the European Union and the subset of Tehran's ties with Paris. A year on from the EU's July 1, 2012, imposition of an oil embargo on Iran, and given inconclusive nuclear negotiations, the question of what direction diplomacy toward Iran should take - tougher sanctions or a relaxation of tensions - has gained new urgency in European policy circles.

A small yet significant clue that Europe may cut a new path away from the United States' one-track coercive diplomacy emerged last week. Britain's Supreme Court struck down the sanctions against a commercial Iranian bank, Bank Mellat, much to the chagrin of US officials, who denounced the court's decision and warned that the bank still remains on the EU and US sanctions list.

The ruling has once again exposed the rift between national and trans-national approaches toward Iran, a split that is perhaps nowhere more apparent than in the dynamic of Iran-France relations, which have been suffering since 2007, when the ardently pro-Israel Nikolas Sarkozy took to the Elysee Palace.

Sarkozy's defeat as president by Francois Hollande in May 2012 led Tehran to vest a good deal of hope - so far frustrated - in a qualitative improvement in relations with France (see Iran seeks to reset relations, Asia Times Online, May 16, 2012). Rouhani's victory is a step closer to fulfilling this hope, in light of Paris's enthusiastic response to Iran's presidential election results and Hollande's statement welcoming Rouhani's participation at the upcoming Geneva conference on Syria. (The conference itself remains under a cloud of uncertainty as the gap between the parties appear to be too great to be conducive to a successful summit.)

One reason why the French are eager to reverse the unhealthy recent deterioration in Iran-France relations is purely economic. No other Western country has been harmed as a result of Iran sanctions as much as France, which a decade ago was Iran's fifth-largest trade partner. According to the French media, between 2005 and today, French exports to Iran have shrunk 60% from 2 billion euros (US$2.6 billion) to 800 million euros. US exports to Iran - of computers, cellphones, soft drinks for example - have increased by 50% during the past two years.

The French oil giant Total last month was forced to pay a US$400 million fine to the US to end a prosecution in connection with oil contracts in Iran. Total still keeps an office in Tehran, and its executives have been anything but shy about their optimism of operations returning to Iran in future.

Yet such predictions run against a tall wall of reality in the form of increasingly robust Western curbs, exemplified by the latest round of US unilateral sanctions targeting the Iranian currency and auto industry; these sanctions are bound to make it even tougher for French companies, such as Renault, to continue operations in Iran (through joint ventures with the Iranian companies).

As a result, Renault may be forced to follow the footsteps of fellow French car maker Peugeot, whose executives decided in 2012 to fold business in Iran after 35 years, thus losing the company's largest foreign market. According to Le Monde, Peugeot's decision, made as a result of its alliance with the American car company, General Motors, contributed significantly to a 16.5% decline in the company's sales in 2012. Since SWIFT blocked the Iranian banking sector from accessing its global financial communications network in 2012 it has become extremely difficult for the European companies to conduct business with Iran, forcing some of them to do so via front companies.

By all indications, the trend toward a new modality of "discrete" economic transactions between Iran and France is on the rise, and Rouhani's presidency will mark a leap forward, particularly if the two countries can coordinate their Middle East policies and achieve a better understanding with each other on such thorny issues as the future of Syria and Lebanon. This depends on Paris's ability to withstand US pressure, not to mention Iranian dissident groups such as MKO, which held a large rally in Paris last week calling for "regime change" in Iran.

Irrespective of such negative inputs in Paris's "new look" at its hostile Iran policy, the signs of a new dynamic in Tehran-Paris relations are rather unmistakable and portend a gradual improvement of the diplomatic and economic climate between the two countries. Boosted by a new moderate Iranian president seeking detente with the West and a greater Iranian contribution to regional stability and conflict resolution, this new dynamic faces multiple challenges. Yet that it is on the upswing is due mainly to the two countries' history of close economic relations and vested mutual interests.

From Tehran's point of view, as a member of the "P5 +1" nations (the five permanent members of the UN Security Council, plus Germany) involved in nuclear negotiations with Iran, France can and should play a more assertive role, by urging a substantive "sweetening of the pot" that is the package of Western incentives offered to Iran in exchange for its nuclear cooperation. Only then can a real breakthrough in the nuclear stalemate occur. Otherwise, the potential exists for further escalation of Iranian nuclear crisis and further economic damage to Iran-European relations.

Still, even in the absence of a nuclear deal, venues, both economic and diplomatic, exist for instigating incremental improvement in Iran's relations with select number of European countries, such as France, Germany, and the United Kingdom - three countries with a record of successful negotiation with Rouhani as Iran's nuclear negotiator nearly a decade ago, in light of the 2004 Paris Agreement that brought about a temporary suspension of Iran's sensitive nuclear activities.

There is little doubt that Rouhani, keen to end the nuclear standoff and attend to economic woes multiplied by Western sanctions, is poised to commence a new era of Iranian diplomacy with respect to Europe. The big question is whether he can find a serious partner in dialogue among leaders who often take their cues on Iran from Washington and Tel Aviv.

*Kaveh L. Afrasiabi is a former political science professor at Tehran University and former adviser to Iran's nuclear negotiation team (2004 to 2006). He is the author of After Khomeini: New Directions in Iran's Foreign Policy (Westview Press) . Afrasiabi is author of Reading In Iran Foreign Policy After September 11 (BookSurge Publishing , October 23, 2008) and Looking for Rights at Harvard. His latest book is UN Management Reform: Selected Articles and Interviews on United Nations CreateSpace (November 12, 2011).

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Source: Asia Times Online

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

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