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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. 

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May 10, 2018

Will Corbyn accept the EEA? Brexiteers can relax. He won't.

Brexit is back in the news again after a short lull, but the debate continues to move in circles. We fail to get excited by the debate on the difference between a customs partnership and maximum facilitation. The latter is preferred by the Brexiteers but won't be accepted by the EU. And the former is preferred by Theresa May but won't be ready by 2020. A customs union will be needed at least as an interim post-transition-period measure.

But after the vote in the House of Lords this week the question arises whether there there is any chance of the UK remaining in the single market through the EEA. James Blitz thinks not. It would require a repositioning by Jeremy Corbyn. He gives three reasons why this won't happen.

The first is that his basic instincts are anti-EU. He sees it as a capitalists' club. Second, there are no tactical advantages for him because he already has Theresa May cornered over the customs union, which he now supports. Thirdly, and most importantly, he is afraid of being cast as someone who does not respect the Brexit referendum. There are political risks for him that he does not want to take. 

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May 10, 2018

What next for the DUP?

Newton Emerson looks at the DUP, the Northern Irish unionist party that supports Theresa May's government, and what the current state of play on Brexit means for it. Senior figures, including party leader Arlene Foster, had advocated a customs union to avoid a sea border between Northern Ireland and the UK. After the vote in the Lords on the EEA this week, there is now outright panic in the DUP. Which way forward? The only red line for the party is that it wants to stay in lockstep with Great Britain. 

The problem is that the DUP never assumed responsibility for its positions, argues Emerson. To understand their Brexit position it helps to remember that they never actually believed that Brexit would happen, so they did not expect any political costs from their members indulging their pro-Brexit instincts. The second thing worth knowing is that there is no common philosophy in the party towards Brexit. Their motivations for supporting Brexit ranged from free-trade fundamentalism through to various shades of British nationalism. Now that the DUP holds the power it does not know what to do with it. Emerson writes this:

"The result could be the worst of all worlds for Northern Ireland politics, in which the DUP backs a soft Brexit and perhaps even plays a small part in delivering it, but where it never gets the credit because of its pride and nationalism’s mistrust. A chance for rapprochement will be squandered and Brexit will remain hugely divisive despite being technically resolved."

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