The European Union and the JCPOA: From Promise to Action

Following the United States' withdrawal from the JCPOA, it seems that the diplomacy of the Islamic Republic, or at least part of it that is somewhat under the control of Hassan Rouhani's government, has pinned its hopes on the European Union, considering it solely responsible for the survival or ultimate demise of the agreement. In an interview with Euro News aired on July 19, Mohammad Javad Zarif, the Foreign Minister of the Islamic Republic, stated that if the Europeans are genuinely interested in preserving the JCPOA, they must be 'prepared to bear costs.' He emphasized that 'Iran should not be the only party in the agreement that has incurred costs.' Interestingly, the head of the Islamic Republic's diplomacy does not have expectations from China and Russia and does not demand any costs from them for ensuring the survival of the JCPOA, even though these two powers participated in all international initiatives to curb Iran's nuclear program and endorsed the agreement of July 15, 2015, in Vienna. Looking to the European Union for saving the JCPOA relies on one of the traditional strategies of the Islamic Republic's diplomacy aimed at exploiting the economic and political contradictions between the two sides of the Atlantic. Based on this strategy, which took shape immediately after the establishment of the Islamic regime, Europe and the United States belong to a collective known as the West and are seen as allies from this perspective, but they are also rivals in expanding their spheres of influence in the world and achieving power. The Middle East, including Iran, is one of the most important arenas of conflict between them. In this context, the Islamic Republic can and should exploit this contradiction and use its enmity with Washington as a trump card to get closer to Europe. The calculations of the theorists of the Islamic Republic regarding the necessity of exploiting the existing contradictions between European and American interests are not entirely incorrect. The exclusion of American companies from the Iranian market following the Islamic Revolution naturally provided a competition-free arena for European companies. Moreover, the existence of anti-American sentiments in some EU member states, stemming from historical and cultural factors as well as political and economic rivalries, is undeniable. On the other hand, the period following Donald Trump's establishment in the White House has exacerbated tensions between the United States and Europe, particularly over what has been termed a 'trade war' between the two sides and the policies that the U.S. President has adopted regarding several international institutions such as the World Trade Organization or NATO. Despite these factors, the Islamic Republic's efforts over the past four decades to benefit from European support against the United States have largely been unsuccessful, and currently, its chances of success are no greater than before. The main reason for this failure is the disregard for realities that many theorists of the Islamic Republic prefer to ignore due to their entrapment in the web of ideological dogmas. The roots of failure can be explained by several factors: a) The United States is a single country, and its foreign policy decisions, despite some legal and institutional obstacles, are relatively swift. In contrast, the European Union consists of 27 countries (excluding the UK), and the divisions among them regarding foreign relations, including with the United States, are significant. In the economic sphere, the EU's foreign policy orientations must reflect the interests of all its members. The former socialist countries of Eastern and Central Europe are strongly pro-American, and not all member states in Northern and Southern Europe share the same sensitivities towards the United States. b) Europe's security in facing various threats is contingent upon American support, and to this day, despite the collapse of the Soviet Union and the emergence of clear divisions within NATO, even major EU powers require U.S. backing to confront geopolitical threats. c) Compared to the United States, Iran is not in a position to tip the scales of European choices in its favor. It is worth noting that in the realm of international economic relations, the main pillar of U.S. power is its market. According to the latest statistics from the World Trade Organization, the U.S. imported $2,251 billion worth of goods in 2016, holding 18% of global imports as the world's largest importer. In the same year, Iran imported only $40 billion worth of goods, equivalent to three-tenths of a percent of global imports. In other words, the capacity of the U.S. market, just for goods, is over 56 times that of the Iranian market. Which major company in Europe would be willing to deprive itself of the U.S. market for the sake of accessing the Iranian market? d) In the realm of monetary and financial relations, the EU has no choice but to accept U.S. hegemony. One of the most important factors that leaves the U.S. free to impose sanctions and economic penalties is the power of the dollar, which, as the most liquid and credible currency in the world, monopolizes 63% of the world's central banks' foreign exchange reserves. In comparison, the euro's share of the world's central banks' foreign exchange reserves is no more than 23%. A European bank that cannot use dollars at the behest of the U.S. is doomed to failure. To summarize: a power like China can exploit the conflicting interests between the U.S. and Europe to its advantage. In contrast, Iran's capabilities in geopolitical and geoeconomic arenas are weaker than to engage in such maneuvers. Some Iranian politicians have well understood this reality, including Hassan Rouhani, who repeatedly stated before the start of his first presidential term that negotiations should be held with the 'big boss' (the U.S.). However, the core of power in the Islamic Republic, which has a dogmatic and ideological view of the world, considers any negotiation with the United States as 'absolute heresy,' and the only maneuvering margin left for Hassan Rouhani's government is the effort to obtain 'guarantees' from the European Union to ensure the survival of the JCPOA. After the U.S. withdrawal from the nuclear agreement in Vienna, the European Union emphasized its will to preserve it, especially by providing the necessary conditions for Iran to benefit from the advantages of this agreement. In the package that Europeans have offered to the Islamic Republic, there are initiatives that have been discussed in previous notes: a) Resorting to 'blocking regulations,' similar to those established by Europeans in 1996 to counter U.S. sanctions against Cuba. The aim of these regulations is to protect European companies from American 'extraterritorial' penalties. b) Resorting to the 'European Investment Bank,' created by member states, to fill the void left by European private banks that refuse to finance trade and investment operations related to Iran. c) Obtaining exceptional licenses from the U.S. for European companies operating in the Iranian market. d) Creating special accounts in the central banks of EU member states and also in the European Central Bank (Frankfurt) in the name of Iran to facilitate transactions with this country using currencies other than the dollar. None of these promises have so far succeeded in encouraging major European banks and companies to cooperate with Iran or preventing European companies operating in Iran from terminating their activities in the country. The promises outlined in the European Union's proposal package have been made by governments, but private banks and companies are not obligated to fulfill them. Even state institutions (including central banks) or intergovernmental organizations (the European Investment Bank) find it very difficult to commit to fulfilling the European Union's promises to Iran because they have a vital need to use dollars and cannot disregard the U.S. financial markets. In this situation, one can only hope for cooperation from small and medium-sized European companies with Iran, particularly those that have no ties to the U.S. market and companies. Moreover, the banking system of the Islamic Republic, due to its non-compliance with international regulations regarding money laundering and financing terrorism, does not provide a favorable environment for potential cooperation with European central banks or the European Investment Bank. In this context, it seems that the European Union, by offering a package composed of the above initiatives, merely wants to 'do its duty,' but it cannot accept any responsibility for the results of this effort, as banks and European companies are not obliged to accept the recommendations of member governments and only decide within the framework of their own interests. Now, let us take a look at what the promises of the European Union tangibly and specifically bring to the Iranian business community. Here we mention only one instance; Mohsen Jalalpour, the former head of the Iran Chamber of Commerce and a pistachio exporter, recently summarized the shocks that his business has faced from Europeans in just one day as follows: - At 10 AM, a European pistachio customer informs him that 'since yesterday, the possibility of transferring money has been severely restricted due to sanctions. You can only send me goods if you agree to receive your payment from the same bank where I have an account. Otherwise, I cannot transfer money to other banks.' - One or two hours later, Mr. Jalalpour receives another email: 'This time, a reputable quality control company that was supposed to audit our company and certify the BRC for us has communicated that after speaking with over 40 inspectors and auditors, none are willing to travel to Iran due to fear of U.S. sanctions (visa sanctions).' It should be noted that without receiving this certification, Mr. Jalalpour cannot export his pistachios to Europe. - And the third shock: the organizers of the 'SIAL' food exhibition in France inform him that this year they are unable to allocate a booth to Iranian companies. Thus, after thirty years, this pistachio exporter is deprived of having a booth at a reputable European exhibition. What message does Federica Mogherini, who essentially plays a role similar to that of a foreign minister for the European Union, have for Mr. Jalalpour?