Uncertainty over Iran nuclear agreement could heighten economic tensions with Europe

USA Today | A decision by President Trump to back out of the Iranian nuclear agreement could derail billions of dollars in Western investment heading toward Iran and trigger European economic retaliation against U.S. businesses, analysts say.

“It signals the breakdown of consensus between the U.S. and its European allies,” said Hassan Hakimian, director of the London Middle East Institute.

Trump is expected to announce his decision this week to decline to certify the nuclear deal. The 2015 agreement, signed by President Barack Obama, along with Britain, France, Germany, Russia and China, lifts international sanctions on Iran in return for a long-term suspension of its nuclear development program.

Since the deal was signed, European countries have “been lining up like mad” to trade with Iran, Hakimian said. If the United States takes action that slows the investment pouring into Iran, European governments would antagonize U.S. allies who could retaliate with trade restrictions against American firms.

European governments have urged the United States to stand by the agreement. And Iranian nuclear chief Ali Akbar Salehi on Tuesday criticized Washington’s recent “delusionary negative postures” and hoped the deal would not fall apart.

“Much more is at stake for the entire international community than the national interests of Iran,” he said, adding that he didn’t want to agreement to fall apart.

A decision to “decertify” won’t mean an immediate end to the agreement, which Trump has called the “worst deal ever.” Congress would have 60 days to reimpose sanctions, but analysts say such a vote is unlikely, effectively leaving the agreement in place.

Decertifying means the U.S. believes Iran is not complying with the nuclear agreement, even though there’s no clear evidence of that, or that the deal is not in the national interest. Trump has signaled he will back out of the accord before an Oct. 15 deadline for certifying that Iran is complying with the terms, which United Nations inspectors say is the case.

The Trump administration may try to use the 60 days to negotiate an agreement that it considers more favorable. The agreement, for example, does nothing to limit Iran’s ballistic missile development or punish it for supporting Hamas and Hezbollah, both considered terrorist groups. Other sanctions imposed by the United States  punish Iran for its support of international terror groups.

Even under that scenario, the climate of uncertainty surrounding the deal would likely make companies in Europe, Japan and elsewhere think twice about investing in Iran for fear of violating reimposed sanctions.

“Decertification will be seen as a warning shot that their investment may come under fire from sanctions,” said Richard Nephew, an analyst at the Center on Global Energy Policy and a former State Department official.

Trump has another opportunity to scuttle the deal in January, the next deadline for waivers that have to be issued every 120 days to prevent old sanctions from being reimposed.

“He’s going to have lots of bites at the apple,” Nephew said.

U.S. companies haven’t benefited much from the lifting of sanctions, since the U.S. trade embargo remains in effect. Most of what was lifted were “secondary sanctions” to penalize non-U.S. companies who did business with Iran.

One major exception is Boeing, which has agreements worth about $19 billion to sell aircraft to Iran. The U.S. did lift some some primary sanctions for the aviation industry.

But European countries have flooded Iran with trade delegations anxious to get a chunk of a potentially lucrative market.

“It could put European businesses on a collision with the Treasury Department if sanctions are reimposed,” Hakimian said. Even the threat of sanctions may be enough to make businesses in Europe or Asia hesitant about investing.

“Decertification would send a pretty negative signal to those companies and their corporate boards,” Nephew said.

In response, European nations may look for ways to retaliate against American firms. “Even the conversation (about decertification) is going to make things really hard if you are a U.S. business operating in Europe,” Nephew said.

William McGlone, an expert in sanctions law at Lathan & Watkins, is skeptical that the European Union would agree on retaliatory sanctions against the U.S.

But he said recent developments may have heightened the worry among European companies considering investing in Iran. “There’s definitely a chilling effect out there and it may be increasing,” he said.

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