Is the JCPOA Sustainable Without the United States?

The Coburg Palace in the Austrian capital became the center of discussions regarding the JCPOA on Friday, July 5, but this time without the presence of a representative from the United States, which left the agreement on May 8, about three years after the nuclear agreement was signed. Mohammad Javad Zarif, the Foreign Minister of the Islamic Republic, and his counterparts representing the five powers committed to the JCPOA (Russia, China, Germany, France, and the UK), gathered in Vienna at the invitation of Federica Mogherini, the EU's foreign policy chief, to discuss the new situation that has arisen following the US withdrawal from the agreement and to seek solutions that would satisfy Iran's desire to remain in it. The joint meeting of the foreign ministers of the countries party to the JCPOA concluded with a statement from Ms. Mogherini. Before the Vienna meeting, Hassan Rouhani's three-day visit to Switzerland and Austria was largely related to the future of the JCPOA without the US. Switzerland does not have a direct relationship with the nuclear agreement, but a significant part of the discussions related to Iran's nuclear file has taken place in this country (Geneva and Lausanne) and often aligns with the EU's international orientations. Austria, in its role as the country that will now hold the rotating presidency of the EU, provided important information to Hassan Rouhani about the package that Europeans are set to offer Iran to ensure the continuity of the JCPOA. From the perspective of senior political and economic officials in Iran, it is the EU that must play the main role in ensuring the continuity of the JCPOA and reducing the complexities and difficulties that have arisen following the US withdrawal from the agreement. The White House's abandonment of this agreement, which means the return of sanctions from the world's leading economic power against Iran, not only prevents American companies from cooperating with the Islamic Republic but also severely limits the scope of economic interactions of non-American companies with it, both in trade and investment. The extraterritorial enforcement of US economic sanctions will begin soon, but their effectiveness is already clearly visible, from foreign companies leaving Iran to the further collapse of the national currency and the clear anxiety that has enveloped both the country's business circles and ordinary citizens. It seems that the content of the proposed European package to ensure the continuity of the JCPOA, as well as what was published in the statement on Friday by Ms. Mogherini as the results of the discussions from the joint meeting of the foreign ministers of the countries committed to implementing this agreement, has disappointed senior officials of the Islamic Republic. Regarding the EU's proposed package, Hassan Rouhani expressed his dissatisfaction last Thursday evening to Angela Merkel and Emmanuel Macron, the leaders of France and Germany. This dissatisfaction is understandable, as currently, the European powers (the Islamic Republic's main hope for saving the JCPOA) have not presented practical and specific initiatives that could protect the JCPOA from the blows of the US and ensure its survival. In fact, what has been presented during Hassan Rouhani's European visit or in Federica Mogherini's statement is a repetition of decisions made last May after the official announcement of the US withdrawal from the nuclear agreement at the European leaders' summit in the Bulgarian capital. The discussion revolves around three main strategies to save the JCPOA: a) Reviving the European regulations known as the Blocking Statute, which the European Economic Community (the next European Union) established in 1996 to counter US sanctions against Cuba. The purpose of these regulations was to prevent penalties that a 'third country' (the US) could impose unilaterally against European companies dealing with Cuba based on its extraterritorial laws. Accordingly, it was decided that the same 'Blocking Statute' would be used in the current situation to neutralize the sanctions that the US intends to restore following its withdrawal from the JCPOA. b) Utilizing the European Investment Bank to finance the activities of European companies in relation to Iran, both in trade and investment. In other words, it was decided that the European Investment Bank would fill the gap left by major European banks, which refuse to cooperate with companies willing to operate in Iran. c) Making necessary efforts to obtain licenses and exemptions from the US Treasury for European companies that wish to continue cooperating with Iran. None of these three strategies seem effective for ensuring economic cooperation between European companies and banks with Iran: 1) The Blocking Statute was not effective even in 1996 regarding Cuba, and European companies preferred to contact the relevant authorities in the US directly rather than confront it. 2) The European Investment Bank is the flagship of the initiatives that are supposed to be used to extricate the JCPOA from its current deadlocks. Last Wednesday, the European Parliament allowed this bank to participate in economic activities related to Iran. The issue is that the European Parliament's resolution for the European Investment Bank is not mandatory. Furthermore, the bank needs to access the US market for a significant part of its financial needs and conducts a considerable portion of its operations in dollars. In this situation, will this large financial institution be willing to ignore US economic sanctions and assist in financing trade with Iran or investing in this country? 3) Finally, the promise of obtaining licenses and exemptions from US authorities for some European companies has also faced firm opposition from Washington, and for this reason, major companies like Total or Peugeot, which have exited Iran, have no hope of returning to this country thanks to licenses and exemptions. The main problem is that Europeans, beyond general and often impractical promises, have so far been unable to provide specific and actionable plans to support the sustainability of the JCPOA. They have not yet been able to undertake clear commitments to counter future US sanctions that would allow Rouhani's government to defend itself against its rivals. Bruno Le Maire, the French Minister of Economy and Finance, recently stated that his country's companies will not be able to remain in Iran because they face problems with money transfers. In this situation, it seems that both Hassan Rouhani and Mohammad Javad Zarif have lost hope for cooperation from major European banks and companies with Iran and are now relying on small and medium-sized enterprises in the EU, which have no interests in the US market. The first wave of the return of US sanctions will be implemented in early August, and the second wave in early November. Jean-Yves Le Drian, the French Foreign Minister, has promised that Europeans will try to present new mechanisms to mitigate their impact before the start of the second wave of sanctions. According to him, this effort is conditional on the Islamic Republic refraining from threatening to withdraw from the JCPOA and returning to its nuclear program. Given the internal situation in the Islamic Republic, the increasing pressure from the US, and the weaknesses of the EU, hoping for the survival of the JCPOA without the US requires a great deal of optimism.