Donald Trump is threatening to tear up one of the most significant accords in recent history. New data from the International Crisis Group says Europe can turn it around.
Two years since the signing of the Joint Comprehensive Plan of Action (JCPOA), there is broad consensus that it is a success. Iran is compliant and the signatories should hold up their side of the bargain.
US President Donald Trump however has other plans. Having branded it the ‘worst deal ever’ and threatened to decertify the agreement, he still seems to be holding the relevant parties to ransom. While Trump may have waived Iranian sanctions in time for the last deadline, he is still counting down the clock to reneging on the deal. That is unless Iran falls into line and agrees to his conditions.
This puts Europe in a tricky spot. As Iran is compliant there is no rationale to insist on changes to the accord. If they don’t try and appease Trump however, he could withdraw the US from the agreement and slap new sanctions on Iran. Already, US posturing against Iran is stopping it from realising the supposed economic advantages to the deal. In fact exclusive survey data from the International Crisis Group shows that the US’s hand here has acted as a deterrent for business in Iran.
Keeping business at bay
Key headlines from a survey of 60 senior managers with direct responsibility for Iranian business at leading international companies (from Iran Nuclear Deal at Two: A Status Report):
- 79% of surveyed businesses delayed plans to enter the Iranian market in the past two years.
- 57% cited as the primary reason for their delay fear of existing U.S. sanctions or snapback of the nuclear ones.
- 11% point to difficulties of doing business in Iran as the reason for their slower than anticipated market rollout.
- 50% say Trump’s failure to recertify the Iran deal in October negatively affected their decision to engage the Iranian market.
- 63% believe that the JCPOA can potentially survive if the U.S. unilaterally withdraws from it.
- 54% say an EU move to reinstate the “blocking regulations” to shield European companies against unilateral U.S. sanctions, while Iran remains committed to the deal, would positively affect their decision to invest in Iran.
The JCPOA must succeed
Economically Europe is invested with Iran through the resurgence of oil sales, growing trade and major investment contracts. That is of course an incentive to the nuclear accord although above all, European leaders do not want to see Iran develop nuclear capabilities. It is therefore, wholly imperative for the deal to remain in tact.
Risking it would also mean risking the emergence of the regional security threat that comes with a nuclear-equipped Iran.
Making it work
The shrinking economic benefits of the the Nuclear deal may tempt Iran to call it quits and walk away from the deal, if there remains no incentive.
The data from the Crisis Group suggests however that there are still companies out there who are willing to do business in Iran. That is even when faced with sanctions and they take measures to mitigate the risk to themselves when doing so.
EU countries could also help here and implement their own blocking regulations. These protect companies from US penalties. The Crisis Group’s data shows that 54% of senior executives said EU blocking regulations would “positively affect the decision to invest in Iran” if Iran remains committed to the deal.
Going it without the US
In the first instance European leaders can work with trying to find a place where both US and Iranian counterparts are happy. For instance, Trump wants Iran to stop ballistic missile testing and France’s President Emmanuel Macron has expressed a willingness to address this. This could take place as a supplemental agreement.
However, it is unlikely that partners other than the US would want to see the JCPOA conditional to such demands. And trying to work in US conditions that do not contravene the agreement will be tough.
Should no side agreement be reached and the US departs, Europe may risk trade with the US and in return it gets a much more modest trade partner in Iran. However, even with blocking regulations, US sanctions will still deter business with Iran.
It will therefore be down to Europe to set wheels in motion in order to forge a long-term relationship with Iran and remain committed to the JCPOA. As the Crisis Group recommends, this could include a long-term energy agreement, allowing a European body to help companies carry out their due diligence in Iran and allowing Iran to become a European Investment Bank partner. These measures would all help Iran to develop the private sector infrastructure it needs and enter the global financial market.
In addition there is much European leaders should be doing diplomatically and simultaneously so as to address tensions and human rights concerns.
Whether the US reneges or not, European countries as well as other signatories have too much to lose from walking away.
It’s therefore, down to them, along with Iran’s cooperation, to ensure the JCPOA remains intact for the sake of Iran’s well-being and the region’s stability.