Reasons for the Failure of the JCPOA from the French Perspective

Neither the Iranians nor the French are satisfied with the implementation of the Joint Comprehensive Plan of Action (JCPOA). This dissatisfaction weighed heavily on the discussions of Majid Takht-Ravanchi, the Deputy Minister for Europe and Asia of the Islamic Republic's Foreign Ministry, with French officials, which began last Thursday in Paris. The recent U.S. elections, which opened the doors of the White House to Donald Trump, have further clouded the outlook for the implementation of the JCPOA and naturally fueled doubts in Tehran and Paris about the future of this agreement. Lost Hopes France, like other members of the European Union, has kept pace with the U.S. in imposing economic sanctions against Iran over the past few years. Furthermore, during the lengthy negotiations over Iran's nuclear file, which concluded with the signing of the JCPOA on July 14, 2015, the French took a tougher stance against the Islamic Republic than other members of the P5+1 group, even the Americans. However, as soon as the prospect of an agreement emerged, France showed more eagerness than others in sending large economic delegations to Iran, composed of representatives from the most prominent companies in the country. This despair does not solely stem from internal problems in Iran, such as suffocating bureaucracy, corruption, or the presence of numerous actors known as 'quasi-state' in the Iranian economy. French companies are familiar with these internal issues, which exist to varying degrees in many other developing countries, and they have some knowledge of how to manage them. Instead, what they did not properly anticipate was the very difficult and sometimes insurmountable obstacles that the U.S. judicial system has created for economic exchanges with Iran, relying on domestic regulations of the United States. France, like its other European partners, has become entangled in the web of these American regulations. Today, various evidence shows that the hopes of French economic and political circles for finding a mythical land in Iran for trade and investment have largely evaporated. Of course, there are advancements in the exchanges between the two countries and their cooperation in certain areas (automobile manufacturing, tourism infrastructure, gas...), but at a much slower pace than anticipated. Many French companies that had high hopes for opening the doors of Iran and rapidly integrating this country into the international economic community are no longer hiding their despair. This despair does not solely stem from internal problems in Iran, such as suffocating bureaucracy, corruption, or the presence of numerous actors known as 'quasi-state' in the Iranian economy. French companies are familiar with these internal issues, which exist to varying degrees in many other developing countries, and they have some knowledge of how to manage them. Instead, what they did not properly anticipate was the very difficult and sometimes insurmountable obstacles that the U.S. judicial system has created for economic exchanges with Iran, relying on domestic regulations of the United States. France, like its other European partners, has become entangled in the web of these American regulations. Importantly, the U.S. judicial system does not violate the legal provisions contained in the JCPOA when it creates 'problems' for French companies seeking access to the Iranian market. In fact, the JCPOA pertains to the lifting of sanctions related to Iran's nuclear file (known as secondary sanctions), which have so far been respected by both the Islamic Republic and the P5+1 group. Instead, what has become problematic are the series of sanctions known as 'primary' sanctions, which have been imposed by the U.S. against Iran concerning issues such as 'terrorism' or 'human rights.' Were French companies—like many of their European counterparts—unaware of the 'primary sanctions' and their impact on the implementation of the JCPOA? It would certainly be an exaggeration to say that the French were unaware of these obstacles, but it is evident that the heavy weight of 'primary sanctions' and the obsessive insistence of the U.S. Treasury and judicial system on enforcing them, even at the cost of paralyzing the JCPOA, was far greater than what French companies and their advisors had imagined. They learned through experience that under U.S. pressure, French banks refrain from financing transactions with Iran, often requiring permits from U.S. entities for trade with Iran, and face other challenges that we will mention. The Atmosphere of Fear The long list of problems that remain in economic relations with Iran despite the signing of the JCPOA has naturally been conveyed by French company officials to Brussels (the headquarters of the European Commission) and also to the French government. Several members of the French Parliament, regardless of their political leanings, have shown significant sensitivity in this regard. They raised the issue of relations with Iran within the broader context of the impact of U.S. laws enacted outside the borders of the country. In relation to this issue, a delegation from the French Parliament traveled to the U.S. in February of this year to gather information, and at the end of this trip, they consulted with representatives of French economic circles. The outcome of this investigation is a 180-page report titled 'The Extraterritorial Application of U.S. Laws,' which was presented last month to the Foreign Affairs and Finance Committees of the French Parliament. The report essentially examines the extraterritorial dimensions of U.S. laws from a legal perspective, but it allocates a significant portion of this examination to a clear and specific case for Iran. Here are a few examples: The report presented to the Finance and Foreign Affairs Committees of the French Parliament dedicates a significant space to the banking problems that weigh on economic relations with Iran. In principle, after the signing of the JCPOA, non-American international banks are allowed to trade with Iran. However, in practice, the restrictions imposed by the U.S. severely limit their maneuverability. In practice, non-American banks can participate in financing transactions with Iran, provided that not a single dollar of the U.S. is used in these transactions, none of the branches of non-American banks participate in these transactions on U.S. soil, and it must also be ensured that Iranian individuals and entities subject to special sanctions have no connection with the transactions covered by international banks. Given such complex regulations and the difficulties in complying with the conditions set by the U.S., international banks prefer to forgo trading with Iran. In 2014, the French bank BNP Paribas was accused of violating U.S. laws for facilitating billions of dollars in transactions with Iran, Sudan, and Cuba and was forced to pay a $9 billion fine to Washington. Following this incident, French banks have been 'frozen in fear,' and no matter how much reassurance they are given, they are simply unwilling to take any risks regarding the U.S. for the development of trade with Iran. The report indicates that some American institutions are trying to create a climate of fear around transactions with Iran. For example, the 'United Against a Nuclear Iran' organization, which presents itself as a non-profit organization and includes several prominent American figures, highlights the risks that threaten companies dealing with Iran on its website and, in this context, sends letters to dozens of companies, including those in France. Pierre Loulouch, a member of the French Parliament who played a key role in preparing this report, states in its interpretation that after the signing of the JCPOA, the process of lifting sanctions began, but given the existence of the 'primary sanctions' imposed by the U.S., economic relations with Iran are practically frozen unless specific permits are requested from American authorities. In practice, a situation has arisen in which French companies request permits from Washington for this or that action based on U.S. regulations. They add that the goal of the U.S. in erecting a wall of extremely complex and intertwined regulations is to achieve economic and strategic concessions. Ms. Karine Berger, a member of the French Parliament and another contributor to the report, adds that under the current circumstances, given the atmosphere of legal and diplomatic uncertainty regarding the lifting of sanctions against the Islamic Republic, it cannot be recommended to companies, especially French banks, to re-establish relations with Iran. These are just a few examples of the complaints heard in French economic and political circles regarding the implementation of the JCPOA under U.S. pressure. There is no doubt that speculation about the definitive positions of Donald Trump, the elected President of the United States, regarding the JCPOA has further deepened the confusion of French political and economic circles about this agreement. It is evident that the French are not alone in this confusion.