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24 June, 2018  ▪  Michael Binyon

Transatlantic contradictions

After the US withdrawal from the Iran treaty, indignant EU governments are looking for new ways to keep agreements with Tehran

Furious, frustrated and resolute, Europe is determined to keep alive the nuclear agreement with Tehran and to defy the international sanctions that President Trump wants to re-impose on Iran.

  Last week the leaders of France, Germany and Britain met in Sofia to look at ways to protect European firms from secondary US sanctions if they continue trading with Iran. Their language was unusually strong in denouncing Trump’s latest unilateral move and their anger at the humiliation piled on Washington’s Nato allies was clear. “Do we want to be vassals who obey decisions taken by the United States while clinging to the hem of their trousers?” asked Bruno Le Maire, the French finance minister.

   For Europe, the US decision to pull out of the Joint Comprehensive Plan of Action, as the six-nation agreement on limiting Iran’s nuclear research programme is known, is not only unwise, destabilising and counter-productive: it is also the latest sign that Trump’s “America First” policy is deeply damaging to more than 70 years of Transatlantic partnership. Donald Trump, it is now clear to the Europeans, does not care one bit about the views of America’s friends and partners.

  For the Europeans, Washington’s repudiation of the Iran deal is only the latest in a series of rebuffs that have angered America’s allies. They were also equally dismayed by the US decision to move the American embassy in Israel from Tel Aviv to Jerusalem. They warned him repeatedly that this would inflame Palestinian opinion and set back the stuttering Middle East peace negotiations. The subsequent riots and the deadly shootings in Gaza have proved them right.

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  At the same time, Europe is also preparing for a damaging trade war against the United States, if the Trump administration goes ahead with its threats to impose new tariffs next month on steel and aluminium imports from the European Union. The EU has already drawn up a list of US exports to target and measures to inflict damage on the US economy. But Brussels knows that once such a trade war begins, it could quickly escalate, damaging all global trade and leading possibly to a massive economic slump.

  But despite their anger and determination to preserve the Iran treaty, is there any way that Europe can protect Iran from sanctions while also ensuring that European firms still doing business in Iran are not ruined by being cut off from all trade with America? The European Commission is now considering reviving legislation introduced in 1996 to circumvent US sanctions on Cuba, but which was in fact never used. This “blocking statute” would make it illegal for EU firms to comply with US penalties and offer compensation to the firms affected.

  But whereas in 1996 Washington stepped back from imposing secondary sanctions on European firms, alarmed at the row this would create within Nato, this time Trump seems not to care in the slightest if his allies are upset. Indeed, he has been strengthened in his defiance by John Bolton, the new hardline national security adviser, who has made no secret of his determination to seek a confrontation with Iran and overturn its government, and who has only contempt for the “liberal” views of most European governments.

  The EU commission is also looking at allowing the European Investment Bank to lend money to EU projects in Iran. It would urge EU governments (and this would include Britain, for the moment) to make transfers to Iran’s central bank to help the authorities receive their oil-related revenues. And it might suggest that Iran is paid for its oil exports in euros instead of dollars, as a way of getting round America’s ban on the use of its currency in trade with Iran.

  The problem for the EU, however, is that even the threat of being shut out of the US market makes all main firms in Europe nervous. Very few of them do much trade with Iran; almost all have some export markets in America. Some of Europe’s biggest firms rushed to do business with Iran as soon as the nuclear deal was signed and most sanctions were dropped. In 2017 EU exports to Iran amounted to $12.9 billion, a huge jump on the figure five years earlier. Now there are fears that many big deals could be jeopardised, including a huge contract by France’s Total energy company to develop a massive gas field in Iran, a $3 billion deal by a Norwegian firm to build solar power plants in Iran and the proposed sale of 100 passenger planes to Iran by Airbus.

  For many firms, the deals include components made in America which would be subject to the new restrictions. Even Airbus could not go ahead with its sale of aircraft if some of the components from America were not obtainable.

  More importantly, however, all these big companies are afraid of being shut out of the US market if they do not observe Trump’s new sanctions. Germany, for example, exports as much to the state of North Carolina as it does to all Iran.

  Europeans see a real danger of Iran returning to a full programme to develop nuclear weapons if sanctions are reimposed. Indeed many of the hardliners in Iran, including the Revolutionary Guard, are itching to resume nuclear research, not only as a defiant gesture to Washington but also to undermine the standing of political moderates in Tehran, including President Rouhani. Visiting EU leaders and foreign ministers warned Trump of these dangers in the weeks before his announcement, including Boris Johnson, the British foreign minister, who normally is supportive of the US president.

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  Trump’s decision to take no notice of any of his allies has alarmed them. It was the same with the Paris climate agreement, which Trump has rejected, against the advice of his European allies and prominent environmentalists. They have been uncertain since then how to handle him. Should they try to co-operate and flatter the new president, as President Macron did when he made a big show of his friendship with Trump? Should they try a softly-softly approach, such as Angela Merkel, who has tried to mute her criticisms of the Washington administration but who has been treated only with derision? Or should they try to ignore differences and continue to support the US in Nato and in its global policies, as Theresa May, the British prime minister, has done until recently? She has little to show for this policy.

  There is another worry about defying Trump over Iran: it puts the Europeans on the same side as Russia and China, two of the other signatories of the six-power nuclear deal. Russia, which is actively seeking to cultivate its relations with Tehran, is currently locked in conflict with most European governments over its interference in their elections and President Putin’s policies in Ukraine and Syria. China also, while enjoying warmer relations with Europe, is not a strategic security partner in the way that the US has been, and would be happy to exploit European differences with Washington for its own economic and political advantage.

  In the end, whether the Europeans can save the deal may depend largely on Iran itself. If Tehran now angrily storms out of the agreement and resumes full-scale production of nuclear material, the Europeans will be powerless and will be unable to modify Iran’s belligerent behaviour in the Middle East, as they had hoped. But the bitterness with Washington will not be forgotten on either side. A difficult period in transatlantic relations is now almost certain.

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