Would Europe find a way to skirt US sanctions on Iran after Trump’s JCPOA exit?

June 2, The Iran Project – In spite of President Donald Trump’s exit from the Joint Comprehensive Plan of Action (JCPOA), also known as the Iran nuclear deal, his European allies are unwilling to pursue his lead, announcing their commitment to the deal instead.

US’ decision to withdraw the deal does not seem to affect American business, while the introduction of “secondary sanctions” against Tehran would be detrimental to European heavyweights operating on Iranian soil.

In response to the US decision, European Commission President Jean-Claude Juncker stated that the 28-member union would amend its Blocking Statute in order to include Washington’s anti-Tehran sanctions in the regulation to shield its businesses.

While some companies have opted for leaving the Iranian market to comply with US regulations and avoid facing sanctions, others haven’t decided yet on what to do, probably waiting for the EU to find a way to sidestep Washington’s restrictions.

Secondary Sanctions

On May 13, White House national security adviser John Bolton said that “it’s possible” there will be secondary sanctions imposed on European companies as a result of the US withdrawal from the Iran nuclear deal.

Bolton said on CNN’s “State of the Union” that he believes some European countries will end up supporting the United States despite comments from European leaders that they regret Trump’s decision to withdraw.

Bolton predicted that “the Europeans will see that it’s in their interests to come along with us” rather than continue with the 2015 deal, under which major European corporations have signed billions of dollars of contracts in Iran.

Mike Pompeo, Trump’s secretary of state, also signaled that the US would continue pressuring allies to follow Washington in backing out of the pact, which gave Tehran relief from sanctions in exchange for halting its nuclear programme.

EU to save JCPOA

On June 1, EU foreign policy chief Federica Mogherini said that the European Union would protect its interests and pledged proportionate measures to Washington’s introduction of tariffs.

She went on stressing that the bloc “is not at war with anyone” on trade, referring to the EU intention to further engage in negotiations on trade issues.

“This doesn’t mean the United States are not our closest partners and friends. Allies they [will] stay,” she pointed out.

Earlier, Mogherini announced that the bloc is determined to save a 2015 multilateral nuclear agreement signed between Iran and the P5+1 group of countries despite the United States’ move to withdraw from the deal.

“Very, very united”

During a meeting with Bolton on May 23, German Foreign Minister Heiko Maas said Europe is still “very, very united” on continuing to support Iran’s nuclear deal.

“Europe is very, very united in its position on the nuclear accord with Iran, and that will not change… We don’t want a proliferation of nuclear weapons in our expanded neighborhood,” he said.

Maas noted that European countries share concerns about Iran’s missile program, but believe that such issues should be addressed without undermining the JCPOA.

Defending EU companies

On May 17, French President Emmanuel Macron said that nuclear deal with Iran should be supplemented and it is necessary to continue negotiations, including on missile program.

The EU states intend to ensure the presence of their companies in Iran despite the US withdrawal from the JCPOA, Macron noted.

Emmanuel Macron stated that the European Union decided to preserve nuclear deal and defend EU companies.

Our main interest in Iran is not in trade, but in ensuring stability in the region, at the same time, we will not become an ally of Iran against the US, he added.

“World’s Economic Policeman”

While some certain states see US pullout from the Iran nuclear deal an opportunity, the mood is not celebratory for Europeans as Europe’s largest economies are lobbying to protect their companies’ investments in Iran.

France’s Finance Minister Bruno Le Maire said European countries should push back harder against the Trump administration over the Iran nuclear deal and not act as “vassals” to the US.

Le Maire proposed creating a European body that would have the same kind of powers that the US Justice Department has to punish foreign companies for their trade practices.

“Do we want to be vassals who obey decisions taken by the United States while clinging to the hem of their trousers?” Le Maire asked. “Or do we want to say we have our economic interests, we consider we will continue to do trade with Iran?”

European and American companies could lose billions of dollars in commercial deals struck since the 2015 Iranian nuclear accord, and lose access to a major new export market.

Planemakers Airbus and Boeing, oil companies and auto manufacturers like France’s Renault and Peugeot could be among companies hardest hit.

Le Maire said France is pushing for exemptions for its companies, but that he has “no illusions” about a generous American response.

Europe should not accept that the US is the “world’s economic policeman,” he said on Europe-1 radio.

French exports to Iran doubled to 1.5 billion euros ($1.79 billion) last year, driven by jets and aircraft and automobile parts, according to customs data.

Exports of German goods to Iran rose by around 400 million euros to 3 billion euros. Around 120 German firms have operations with their own staff in Iran, including Siemens, and some 10,000 German companies trade with Iran.

Total vs US

Last week, the Iranian oil minister said that Total has two months to negotiate with US over sanctions exemption in a bid to remain in Iran’s South Pars 11 Phase development project.

“Total has 60 days to negotiate with the US government. During these 60 days, the French government can negotiate with the US government over the fate of Total’s investment in Iran,” Bijan Zanganeh stressed.

The Iranian oil minister said that if the US government agrees to exempt the Total, the company will remain in Iran, otherwise, the China National Petroleum Corporation (CNPC) will replace the French company.

The minister said an agreement with Europe would encourage other potential buyers of Iranian oil.

“Europe is buying only one third of Iranian oil, but an agreement with Europe is important to guarantee our sales, and find insurance for the ships ferrying the crude. Other buyers would also be inspired by this,” he said.

About his recent presence in Majlis (Parliament) to review the current situation, Zangeneh said Petroleum Ministry and the Majlis Energy Commission share the same point of view about how to cooperate to overcome the present difficult condition.

EU Sharp criticism

US sanctions on Iran reimposed following Trump’s withdrawal not only block American firms from doing business in the country, but also bar foreign firms that do business there from accessing the entire US banking and financial system.

Trump’s move to kill the nuclear accord was sharply criticized by European leaders, who have pledged to uphold their side of the agreement.

Many analyst believe that the JCPOA isn’t actually an independent variable in EU policies and actions, and at any moment, the European troika and other EU member states may change their approach to this agreement.

The equations which affect the nuclear agreement are getting more and more complicated.