May 10, 2018
Time for some clear thinking on Trump and Iran
The picture of a fox in the henhouse comes to mind as a description the current state of transatlantic diplomacy. Judging by some of the reactions yesterday, there was clearly panic in the EU at the emerging deeper implications of Donald Trump's decision to pull out of the joint comprehensive plan of action (JCPoA) with Iran. We were particularly amused by the evolving news coverage in Germany, following the tweet of the new US ambassador who demanded an immediate withdrawal of German companies from Iran. The initial reaction was one of contemptuous disdain. One newspaper convinced itself that the ambassador must not yet be in full command of diplomatic decorum. The condescending tone changed once they realised that Trump is serious about secondary sanctions. His decision to pull out of the JCPoA has deep interlinkages with the other current transatlantic conflict - about tariffs and trade.
This puts the EU in a position it hates the most. It has to act relatively quickly and decisively to forestall real damage, and it needs to prioritise its joint interests over those of individual member states, and possibly risk open conflict with the US.
We agree with the assessment by Philip Stephens. The EU should immediately decide to indemnify companies against US sanctions, and levy counter-veiling sanctions on US companies in Europe. And the EU should make it absolutely clear that it would oppose any military strikes against Iran, and that it would not allow the US to use EU bases for such military action. We also agree with the view of the German commentator Ulrich Speck (@ulrichspeck) who noted that, if Europe wanted a role in the Middle East, it needs a coherent foreign policy.
But this is not the way things are going. We noted a report in the FT, according to which the EU wants to ask the US to be exempted from the sanctions. The article quoted French diplomats as saying they would use the time window of three to six months before sanctions become effective to negotiate opt-outs.
We think that this approach is utterly pathetic, but very much consistent with the small-country mindset that pervades policy-making in the EU at all levels. One option under consideration is to safeguard existing business links with sovereign credit lines guaranteed by the European Investment Bank. The article said the EU could, in theory, reactivate legislation to block the effect of US sanctions. But, even if the EU were to seek an open confrontation with the Trump administration, companies may still pull back from Iran because they wouldn't want to suffer damage to their US business interests.
Elmar Brok is quoted as saying that deal will be dead unless Iran maintains the economic benefits. We think it is hard to see how this is possible without an uncharacteristically determined stance by the EU - one that goes beyond EIB credit lines. We would instead expect the EU to play to its traditional role - find a compromise on a form of words but fall short of material action.
A secondary point, noted by the Daily Telegraph, was that Iran constitutes an important part of the EU's strategy to wean itself off its dependency on Russian gas. Iran has the world's second largest reserves of natural gas, after Russia.