The Unwritten Unity Between Hassan Rouhani and the European Union

Despite the escalation of tensions both internally and regionally in Iran, it is evident that the European Union, after months of hesitation, has concluded that its strategic interests, both politically and economically, necessitate maximizing the potential of the Joint Comprehensive Plan of Action (JCPOA), which ended the crisis over the Islamic Republic's nuclear file. The most significant signs of this trend can be seen in the new contract that the French company 'Total' signed with Iran for the development of the South Pars gas field, as well as the unprecedented efforts within the European Union to rebuild financial communication bridges with Iran. While Hassan Rouhani faces major economic and political challenges, the expansion of the EU's presence in various commercial, industrial, and financial sectors in Iran could alleviate some of the burdens weighing on the President of the Islamic Republic. Throughout the entire period of economic sanctions related to the Islamic Republic's nuclear file, the European Union acted hand in hand with the United States. In fact, without close cooperation between Europeans and Americans, sanctions could not have dealt such devastating blows to Iran's economy. The restrictions against the Islamic Republic peaked when the EU decided in 2012 to completely halt oil purchases from Iran and deprive the country's banks of access to the SWIFT network, which technically enables international financial communications. This dual shock significantly impacted Iran's rapid advance towards what Hassan Rouhani described as 'financial bankruptcy' and 'collapse.' Mr. Rouhani used these two terms in his recent election campaign (under the title 'Iran Again'). During the tumultuous negotiations that ultimately led to the signing of the JCPOA in July 2015, Europeans sometimes followed even tougher positions regarding the Islamic Republic than the Americans. From this perspective, the behavior of Laurent Fabius, the then French Foreign Minister, is exemplary. However, the signing of the JCPOA gradually created a rift in the unity between the US and Europe regarding Iran. It should be noted that the JCPOA only pertains to the Islamic Republic's nuclear file and the lifting of related sanctions, known as 'secondary sanctions.' In other words, the so-called 'primary sanctions,' which are mainly imposed by the United States in connection with other issues (terrorism, human rights, money laundering, missile issues, etc.), are not covered by the JCPOA and remain in force. After resolving the Iranian nuclear issue based on the Vienna agreement, the difficulties arising from the overlap of lifted 'JCPOA' sanctions and unresolved 'non-JCPOA' sanctions became glaringly evident. Major economic entities in the EU, which had high hopes for trading with Iran, are significant victims of this overlap. The main problem for these companies is the barriers to participation of major banks in financing investments and trade with Iran. How can one trade with Iran when European financial giants, due to the strict regulations stemming from the 'primary sanctions' of the US, must navigate a thousand and one aspects to avoid falling under Washington's heavy penalties? The most significant issue is the use of the US dollar in transactions with Iran. European banks can participate in financing transactions with Iran, provided that not a single US dollar is used. Moreover, branches of European banks on US soil must remain excluded from these transactions, and none of the individuals or entities subject to US special sanctions should be involved. Such difficulties, along with other challenges that cannot be addressed here, have placed financing transactions with Iran in a very difficult situation. Complaints about the 'extraterritorial application of US laws' have arisen, both within EU member states and in the EU's executive institutions in Brussels, especially when Donald Trump entered the White House and even questioned the sustainability of the JCPOA. Nearly two years after the signing of the JCPOA, nothing remains of the unity that existed between the US and the EU regarding the Islamic Republic and the necessity of confronting its nuclear program. In fact, the two powers are moving in different and even contradictory directions regarding their assessments of the Islamic Republic's domestic and regional policies: a significant portion of Europe's energy comes from the Middle East, and the chaos in this region also spills over to Europe in various ways, including waves of migrants. Unlike Europe, the US neither needs Middle Eastern oil nor is directly affected by events there at a level comparable to Europe. 1) Europeans, unlike Donald Trump's America, consider the JCPOA in its current form a successful agreement based on sound foundations. 2) Europeans, unlike the current White House host, see the existing rift within the Iranian regime and take it into account in defining their policies towards the Islamic Republic. 3) The EU does not accept, contrary to the US leadership, that Iran is the leading sponsor of terrorism in the Middle East and the world. 4) The EU does not take sides in the conflict between Saudi Arabia and Iran, unlike the US. Based on these assessments, the EU deems the expansion of economic relations with Iran necessary for both its commercial and financial interests and its long-term strategic interests. The Middle East is engulfed in severe crises whose intensity and spread could expose Europe to uncontrollable risks. A significant portion of Europe's energy is supplied from the Middle East, and the chaos in this region also spills over to Europe in various ways, including waves of migrants. Unlike Europe, the US neither needs Middle Eastern oil nor is directly affected by events there at a level comparable to Europe. Given all these factors, it seems that the EU is interested in maintaining stability and unity in Iran, and strategic assessment is one of the important factors that compel EU members to encourage their economic entities to invest in Iran. The return of the major French company 'Total' to the South Pars gas field, with its final contract signed on July 2, is a sign of a significant change in the EU's relations with Iran. This event could lead to the entry of several other major players in the oil and gas sector, including the Dutch-British company Shell, into Iran. However, what indicates a significant transformation in the EU's economic relations with Iran more than anything else is the developments occurring in the banking sector. The efforts of political leaders in European countries to attract cooperation from major banks to participate in transactions with Iran have yet to yield results. Major financial institutions such as BNP Paribas, Crédit Agricole, HSBC, ING, and others have so far faced heavy financial penalties for not complying with US sanctions. For this reason, major European banks avoid entering any transaction that involves Iran. Given this major obstacle, European governments have decided to seek assistance from their state banks to open new channels for financing transactions with Iran, and also to create a favorable environment for small and medium-sized banks that do not have significant interests in the US. In Italy, 'Banca Popolare di Sondrio' has launched a money transfer service in cooperation with twenty Iranian banks for business owners. In the same country, the state institution 'Cassa Depositi e Prestiti' supports the development of Italian companies' activities in Iran through its branches. Given the banks' fears of participating in economic activities in Iran, 'Cassa Depositi e Prestiti' has mobilized nearly nine billion euros to enhance trade between Iran and Italy. In France, the country's treasury has turned to the 'Banque Publique d'Investissement' (BPI France) to assist French companies willing to trade with Iran, which can provide facilities of under one hundred million euros to applicants. This institution is entirely French and should not be subject to US economic penalties. Nevertheless, its managers consider all aspects and, to avoid any hassle, are in constant consultation with the US Office of Foreign Assets Control (OFAC). These initiatives can also be seen in several other EU member countries. However, there is no doubt that state financial institutions and small to medium-sized banks cannot meet Iran's and Europe's needs for advancing their economic cooperation. The reluctance of major banks to engage in this cooperation remains a significant problem. Another issue is the events occurring in the Iranian political scene. Politically, the increasing entry of European economic entities into Iran is naturally beneficial for Hassan Rouhani. The 'principlist' opponents of the president, who are also against the JCPOA, have so far criticized Rouhani for failing to attract foreign investments despite signing this agreement, as Western companies continue to refrain from entering the Iranian market. However, those same critics, as soon as the gas contract with 'Total' was finalized, criticized it and accused Rouhani's government of handing the country's resources over to 'Western looters.' There is no doubt that the increasing entry of European investments into Iran, if realized, will help strengthen the president's position against his opponents. From this perspective, it can be said that there is an unwritten unity between the European Union and Hassan Rouhani. The EU's advancement in expanding its relations with the Islamic Republic, despite the obstacles in its way, signifies the EU's opposition to the regime change agenda in Iran proposed by the United States. Given the prevailing conditions in Iran and the region, it seems that Europeans are hopeful for the consolidation of the reformist faction within the Islamic Republic.