Europe Is Left With Few Options to Save the Iran Nuclear Deal

(Bloomberg Businessweek) -- On July 9, French President Emmanuel Macron sent his top diplomatic adviser to Tehran on a mission to ease spiraling tensions between the U.S. and Iran. Having cultivated direct lines to President Trump and Iranian President Hassan Rouhani and spoken to each since Trump ordered and then canceled airstrikes on the Islamic Republic in June, Macron saw the potential for dialogue. For all the chest thumping, he was confident the Iranians didn’t want further escalation, according to a person familiar with the French president’s thinking. Trump’s aggressive approach, Macron reasoned, was nothing but a tactic from his past life as a real estate dealmaker.

The message that envoy Emmanuel Bonne delivered to Tehran was simple: A pause in nuclear activities, which Iran had restarted a year after the U.S. violated the 2015 Joint Comprehensive Plan of Action (JCPOA) by exiting it and imposing new sanctions, would be to its advantage. But during Bonne’s meeting with Rouhani, Trump fired off another incendiary tweet, accusing Iran of having long violated the nuclear deal in secret and pledging to “substantially” increase sanctions. Hours later, reports emerged that Iranian vessels had tried to impede a U.K. tanker in the Strait of Hormuz, a claim Iran rejected.

European nations, especially France and Germany, have been trying to save what’s left of the JCPOA, which promised to plug Iran into global trade in exchange for curbing its nuclear program. But their efforts have been frustrated by Trump’s unpredictability, which has unsettled already fragile relationships with the Islamic Republic.

Iran says its activities hardly constitute a violation, pointing to Article 26, which says it could “cease performing its commitments” in “whole or in part” should the U.S. reimpose certain sanctions. Given the deal’s “reliance on temporary suspensions of sanctions, waivers, and other workarounds, it very much depends on the support of the American president to function as envisioned by its architects,” says Torbjorn Soltvedt, an analyst at global risk consulting firm Verisk Maplecroft in the U.K.

Europeans have gotten pushback from some top U.S. officials, including national security adviser John Bolton, who advocate the use of force against Iran and have signaled their preference for regime change. Since May, when the U.S. suspended waivers that allowed for surpluses of low-enriched uranium to be sent abroad, Iran has surpassed limits on its stockpile. It’s now also enriching to higher levels of purity than those allowed under the JCPOA. Enriched uranium is used to fuel nuclear plants but can also be used to build bombs.

These moves, while provocative, don’t pose an imminent proliferation risk, and Iran has said they could be reversed “within hours” if sanctions were suspended. Nevertheless, the country has attempted to use them as leverage to push the remaining parties to the deal—the U.K., France, Germany, Russia, and China—to accelerate attempts to get around U.S. trade prohibitions. “The Europeans believe that this was important for their security. If it is important for their security, then you invest in your security,” Iranian Foreign Minister Mohammad Javad Zarif said to Bloomberg Television in a July 17 interview. “The Europeans need to take the necessary action.”

France, the U.K., and Germany have worked over the past year to develop Instex, a financial channel meant to provide European companies with a trading vehicle to sell goods and services to Iran without using dollars, routing transactions through U.S. banks, or moving money across the Iranian border. Instex has yet to process its first transaction and would initially be limited to food and drugs, which aren’t targeted by U.S. bans. Iran also wants the tool to process oil sales, the main source of revenue for the country and subject to U.S. penalties.

“Europe neither has the will to face up to the U.S., nor is it capable of acting as a fully sovereign and united entity in a global financial system dominated by the U.S.,” says Ali Vaez, director of the Iran Project at the Brussels-based International Crisis Group. Still, getting Instex up and running, even in its current form, would send a message to Iran that Europe is a credible partner. It would also help Rouhani push back against hardliners at home who advocate maximum resistance against the U.S.

Ellie Geranmayeh, senior policy fellow at the European Council of Foreign Relations, says other small initiatives could be possible with help from Russia and China. If Iran were to freeze its nuclear escalation for a few months in return for a “realistic deliverable,” she says, “this will provide a cooling-off period and create space for Europeans to think more creatively about what they can deliver.”

One deliverable, floated by Iranian Vice President Eshaq Jahangiri in state media in early July, might be for the European Union and China to help find buyers for Iranian oil supplied in the future, in return for advance investment, goods, or services, allowing it access to credit. “The idea is to keep the basic pillars of the JCPOA in place until the 2020 elections in the U.S.,” Geranmayeh says. “From the Europeans’ perspective, this would be a real achievement.”

Regardless of who gets elected, she says, “it’s going to be easier for any administration to engage Iran if the nuclear issue is somewhat in check rather than having to start from scratch.”

To contact the editor responsible for this story: Jillian Goodman at jgoodman74@bloomberg.net

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