Iran's Three Options Regarding the US Withdrawal from the JCPOA

Following the US withdrawal from the Iran nuclear deal, European officials have emphasized their commitment to fully implement the JCPOA and the importance of preserving this agreement. In response, Iranian officials state that they will announce their decision on how to confront the US exit from the JCPOA after several weeks of consultations with the European Union and other JCPOA parties, namely China and Russia. In this context, Hassan Rouhani has stated that consultations with the EU will clarify whether remaining in the JCPOA guarantees Iran's interests, while the Iranian government has also asked the EU to implement its commitments regarding the JCPOA unconditionally. Meanwhile, some economic experts and analysts suggest that opening the Iranian market to China and Russia could change the EU's perspective on Iran. Mehrdad Emadi, an economist and expert on economic and financial sanctions in London, has answered questions on this matter in an interview with Radio Farda. He mentions that Iran has three options regarding the US exit from the JCPOA, one of which could be to set a three-year deadline to test the EU's cooperation with the JCPOA. Mr. Emadi, how likely is a change in the EU's perspective towards Iran? Look at the most basic of these, which was for the hostage-taking of American diplomats. The subsequent sanctions, which were more serious, were in a proposed bill by the White House called the Iran and Libya Sanctions Act, which later became the Iran Sanctions Act and related to investment in Iran's oil and gas projects, with a cap of $20 million, and any company, not just American companies, that invested more than $20 million would be sanctioned. Then the US added two more sections to these. One section was a large list that included the IRGC and all military-industrial projects of Iran, and anything related to the capabilities of the IRGC and hardware that could carry weapons of mass destruction; after this, another thing was added, during the years 2003 and 2004, where all financial and banking activities of organizations and entities that had direct or indirect links with Iran's military-security institutions were sanctioned, with the IRGC being the center of this circle. They were also included in these sanctions. After that, the last stage, which dates back to 2009 to 2011, which the Europeans accompanied, was that regarding all industrial purchases that Iran makes, and securing the sources of industrial purchases, it had to be shown that this money had no relation to the IRGC or was not dual-use, which the IRGC might also use in its industries; this was not approved. In this context, this last paragraph of sanctions was that it closed all financial channels for Iran's foreign purchases. These were for ordinary projects, all of this went under a large list, and that large list related to the US-approved sanctions regarding limiting military capabilities and money laundering of institutions related to the IRGC. When we look at Mr. Trump's speech, and then go back to what was specified in the US Congress last week, we see that two more sections will be added to these by the end of June, which will significantly increase the cost of European companies working with Iran and greatly increase their risk. And I believe the main sting is here. Because the only major contract Iran has with the US is that of Boeing, and unfortunately no other work was done in oil projects that would be positive for both countries. However, Iran has multiple projects with Europe, and these two sections that will be added will make the work of European companies very heavy. Mr. Emadi, the EU has issued a statement emphasizing that it will not allow the sanctions lifted before 2015 to be reimposed on Iran. What sanctions were lifted during the JCPOA that the EU wants to protect now? The most important sanctions for Iran were these: the first stage of sanctions on the sale of Iranian oil, both the sale and transportation of it via oil tankers and the insurance of these tankers, which had a very deep impact on Iran's oil sales. These were lifted. Another part was the lifting of non-military industrial investments in Iran, such as the projects that Italy currently has for railways, or the project that Mercedes-Benz has for heavy trucks in Iran and assembly and production after five years, and even the project that was once discussed about Airbus possibly establishing a repair workshop for some of its aircraft on the northern shore of the Persian Gulf, near Chabahar, these could no longer be subject to sanctions. Then, the third part, in the short term, was the most important because it was crippling Iran economically, was the banking sanctions. Opening credit for working with Iran, and transferring Iran's deposits. A significant amount of Iran's deposits at one time, close to $50 billion, were frozen in banks and institutions related to Europe. That sanction was also lifted. Other parts that were lifted included cultural and academic collaborations with Iran, which at one time London universities no longer allowed students from Iran to come for higher education and enroll in engineering courses at good British universities. This had become very problematic for us. All of these, when you set aside, the exchange of technology with Iran, which in fact is the entry of technology into Iran, because it is not that Iran wants to give technology to Europe. But it was important for Iran to have access to existing technologies in Germany, Austria, Sweden, and Denmark, from oil pumps to automotive and so on. All of these opened up. What was said in Iran that the JCPOA did nothing, the JCPOA actually opened many of these doors. The EU certainly wants to preserve those first three stages that I mentioned. Because they have direct importance for European companies that want to work with Iran or are currently working or have agreed. Regarding cultural and academic exchanges, the EU has a long-term view of Iran that it can be an important manufacturing partner for European companies if those in Iran's security institutions allow this to happen. For now, it has not happened. But Mr. Emadi, many of the points you mentioned are actually contracts between non-governmental companies with Iran. How does the EU intend to guarantee the security of these contracts so that the sanctions the US is about to impose do not affect these contracts? Your question raises the most costly aspect of this American project. Because in fact, the US cannot tell the German government not to enter into a trade contract between two governments. This can be done by a company like Continental, which is the second largest European company in the construction of trains, locomotives, and railways. Well, you cannot tell the German government this because it says no, I have a contract and I have signed it. But within its legal framework, if it is presented in such a way that the federal government in the US says that if Continental contracts with Iran, it can no longer enter the US market. This was part of Mr. Trump's speech that was not looked at much, that not only will we sanction Iran, but we will also sanction those who accompany them. In our eyes, these projects are not acceptable projects, they are also self-sanctioning! This is the sting and the bite in Mr. Trump's message. The German government has said we will maintain these relations. But a German state bank is also in the US, this bank, the Export-Import Bank, guarantees the work of American companies in countries where they work, such as Saudi Arabia or Pakistan, etc. It is in Germany, it is also in the UK, but it is not that financially this bank can fully cover very heavy projects. Financially, it can cover to some extent. Europe itself has a fund that is a fund for cooperation or empowerment for EU exports. Now, if this is to be used for Iran, if the JCPOA is preserved, the charter of this fund needs to be rewritten somewhat. Because many of the contracts that Germany and France have signed with Iran are not exports, they are industrial cooperation contracts. Like the contract with Peugeot Citroën, PSA, or like the contract with Volkswagen AG, these are not the sale of Volkswagen to Iran; they are providing parts and technology to Iran, and production does not directly fall under that fund. This needs to be rewritten, which also takes some time and also the countries within the EU that do not want to confront the US, which I can name Poland, which has no positive view of wanting to put itself in a new confrontation with the US, well there, considering the EU's constitutional law regarding rewriting the statutes of EU organizations, everyone must cooperate, and it is not a matter of majority voting. This can complicate the work. However, in terms of financial capacity, I must add that the EU has nearly half a trillion euros in various budgets at its disposal, and if it wants, it can do something. Even legally, if a public prosecutor in New York or the US Treasury wants to pressure, for example, Continental or Total of France, it can legally cover this completely. But it specifically comes back to what profit the EU sees in working with Iran in the long term. The perception and assessment of this profit is important. If the EU sees that Iran, instead of opening its economy, is making it more Russian and Chinese, there will also be motivation within the EU to perhaps better let some of these sanctions be introduced to reduce the cost of confrontation with the US, and also that we no longer see profit in working with Iran. Of course, why should we put ourselves under this risk? Behavior within Iran, especially I point out this symbolic burning of the JCPOA in the parliament, which right now as you speak with me has been seen and examined in three European capitals, what does this mean, does the parliament say this agreement should be completely destroyed, these are political suicides that unfortunately in these decades we have seen many examples of, and such actions can diminish the motivation in Brussels to support this agreement in the long term. Mr. Emadi, what is the EU's economic outlook? You said that the opening of the Iranian market or the Russian and Chineseization of the Iranian market could create a change in perspective within the EU; how likely is this to manifest and be impactful in the coming months? I believe this has somewhat started and they have shown attention to it. If we look, from the first week of November, our Azar month, I think Mr. Putin went to Tehran, and before that, Mr. Lavrov was in Tehran, the Russians managed to gain a foothold in 10 major oil projects in Iran. Six of those contracts were direct awards without competition with companies from other countries, meaning they were awarded directly to Russian companies. We see Gazprom, Rosneft, without any competition, were awarded very large projects in South Pars and western hubs. This has somewhat shaken the EU. Because the issue of energy security was one of the cards that Iran had that made Iran very valuable to the EU. Because the gas needs of the EU and Iran's gas resources, which have been the largest gas resources for the past two years, could significantly reduce the damage that the EU has seen over these 11 years from the issue of gas cut off by the Russians, both in Italy and Austria, and lower the EU's vulnerability. This is what I mean by Russianizing and making oil and gas contracts Russian; this has greatly diminished Iran's value and importance. These contracts are not even short-term. The shortest of these contracts is 15 years, and the longest is 25 years. This is just part of it. Three weeks ago, the Iranian Ministry of Oil announced that even in oil and gas projects where Europeans are involved, we would like the Russians to be there too. Meaning they are essentially telling European companies that you must give a share to the Russians. This not only reduces the foothold of Europe in terms of participation and investment in the oil sector but also opens the door for these companies to exit. We see Royal Dutch Shell, which was supposed to come in place of British Petroleum in a project, they have now lost much of their enthusiasm. Under a larger microscope, if we expand this to other sectors, we see that in the railway sector, even as you speak with me, we have purchased more than three thousand wagons from the Russians. The Russian railways are also important in terms of size standards, which is very important, and transportation engineers will understand my reference, and also in terms of cargo pressure compatible with Russian needs. These have caused a new perspective to emerge in the EU regarding Iran in recent weeks, that those who are truly more powerful and influential in Iran and have the final say, have no desire to develop relations and industrial cooperation with the EU. Alongside this, they see that large contracts, one after another, if not awarded to Russia, are awarded to China. This opens the door for new monopolies.