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Can Europe Defend the Iran Nuclear Deal After Trump ‘Sabotage’ #IranNuclearDeal

Can Europe Defend the Iran Nuclear Deal After Trump ‘Sabotage’ <a class="hashtagger" href="https://sigmaturkey.com/tag/irannucleardeal/">#IranNuclearDeal</a>

The next few days could decide whether the Iran nuclear deal can survive without the support of the US, or if it will collapse in the face of a new wave of sanctions that Washington is due to impose on Iran over the next six months.

For now Iran says it is open to sticking with the terms of the deal, which came into force in January 2016 after many years of tough diplomatic negotiations. However, it is keeping its options open and may yet walk away.

European powers seem determined to try and ensure the Joint Comprehensive Plan of Action (JCPOA) – the formal name for the deal – can remain active. They have many other governments on their side. In recent months, China and Russia have tried to save the deal from what Russian foreign minister Sergei Lavrov had described as “attempts to sabotage” it. Both countries still support the deal, as do other major Asian powers such as Japan.

In contrast, the number of governments that have voiced clear support for the new US position is small, with the most notable backers being Israel and a handful of Arab Gulf states including Saudi Arabia and the UAE.

The strength of feeling in Europe was laid clear in comments by Federica Mogherini, the EU’s high representative for foreign affairs, on May 11, when she told a conference in Florence, Italy that the EU is “determined” to “preserve what is still working and delivering.”

She also had some caustic words that seemed aimed at Trump’s decision, although she did not mention him by name. “It seems that screaming, shouting, insulting and bullying, systematically destroying and dismantling everything that is already in place, is the mood of our times,” she said. “This impulse to destroy is not leading us anywhere good. It is not solving any of our problems.”

Iranian foreign minister Mohammed Javad Zarif is in the midst of a tour of key world capitals to try and shore up the deal and ensure that Iran is not left too badly exposed to new sanctions. He held talks in Beijing and Moscow on May 13 and 14 respectively. The next stop is Brussels, where he will hold talks with his counterparts from France, Germany and the UK on May 15. Tehran has indicated it will demand practical guarantees from Europe to safeguard the JCPOA during these talks.

The key is likely to be what sort of blocking mechanism Europe is willing and able to implement to protect its own companies against US sanctions for doing business with Iran. French finance minister Bruni Le Maire has indicated Paris is in favour of introducing some measures to counterany US sanctions, but it remains unclear exactly what steps the EU might take. German foreign minister Heiko Maas has noted the difficulty in putting in place an effective mechanism to shield European companies.

At least some Europe-based investors appear content that they can continue. “We will continue with our venture despite the challenging environment,” said Florian Hellmich, chief executive officer of Sweden-based Pomegranate Investment, in a circular sent to shareholders on May 11.

The firm, which was set up in 2014 when sanctions were in full flow and has been investing in Iran ever since, said it expects “extraordinary opportunities and great returns arising in the aftermath of the recent developments.”

Even so, some business with Europe is bound to disappear and Iran is most likely to turn once more to its partners in Asia to replace that lost trade.

Meanwhile, Iran’s neighbours are clearly divided on the wisdom or otherwise of the US move. While Saudi Arabia, Bahrain and the UAE were quick to praise Trump’s decision to abrogate US commitments in the JCPOA, others have been more circumspect and, at times, critical. The Iraqi foreign ministry expressed “regret” at Trump’s decision. Others such as Kuwait, Qatar and Oman – which have important economic and diplomatic ties with Tehran – have urged dialogue and de-escalation.

The situation is not just about Iran’s relations with the rest of the world though. If the deal does collapse, the moderate administration of President Rouhani could come under pressure from more hardline elements within Iran, ahead of parliamentary elections in 2020 and the next presidential contest a year later.

 That likelihood will increase if, as many expect, the Iranian economy takes another hit as a result of the reinstated US sanctions. Will Scargill, senior fiscal analyst for oil and gas at GlobalData, says there is likely to be a slowdown in the critical Iranian hydrocarbons industry.

”Finding new investment to fund crude oil development projects in Iran has been a challenge and the imposition of new US sanctions is likely to cut demand for Iranian crude,” he said.

Among those that could be hit is French oil giant Total, which signed a 20-year deal to develop phase 11 of Iran’s South Pars field in July last year. In what may turn out to be a wider trend, officials in Iran have indicated that China National Petroleum Corporation (CNPC) is expected to step in if the French firm is forced to exit its deal.

Published in https://www.forbes.com/sites/dominicdudley/2018/05/14/can-europe-defend-the-iran-nuclear-deal-after-trump-sabotage/#184c3abb13c3

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