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Commentary | 25 January 2019

Europe’s High-Stakes Balancing Act on Iran

As the Iran nuclear deal enters its fourth year of implementation, its future looks more uncertain than ever. European leaders are under growing pressure to sustain the agreement and, towards that end, protect trade ties with Iran in the face of stringent U.S. sanctions. With growing frustration in Tehran and threats to European unity, leaders face a number of challenges in the near term.

The immediate litmus test of Europe’s ability to protect trade with Iran is the establishment of the so called Special Purpose Vehicle (SPV), a payment channel independent of the United States. The SPV is widely anticipated to be launched within the next week. According to reports, it will be registered in France and led by a German banker while counting the United Kingdom as one of its shareholders. But the EU and the E3 governments (France, Germany, and the United Kingdom) have not provided any substantial details since the initiative was announced in September. The work on getting the SPV off the ground has been complicated by a number of factors, including clear indications by U.S. officials that those who host or participate in the scheme could be targeted by U.S. authorities if facilitating what the United States considers sanctionable trade (such as oil). It now looks increasingly certain that the SPV will be restricted to facilitating trade in non-sanctionable goods, along the lines of the Humanitarian Special Purpose Vehicle (H-SPV) that was recently outlined in an ELN report.

But in parallel to working out the details of this new mechanism, European policymakers also face a challenge in selling the SPV to the Iranians. While the initiative was initially welcomed as a substantial step forward – following its announcement, Iran’s Foreign Minister Javad Zarif described the European Union’s support of the nuclear deal as “better than expected” – public sentiment in Iran appears to be changing. Several recent reports and editorials suggest a growing dissatisfaction over the fact that it will be restricted to humanitarian goods and not other essential Iranian exports such as oil, as originally hoped for. The situation looks increasingly precarious following remarks by Ali Shamkhani, Secretary of Iran’s Supreme National Security Council, that “Europeans’ opportunity to execute their commitments to [Iran] under the JCPOA…has ended” – the first such decisive statement from a top Iranian official.

Simultaneously, the EU is seeking to address other aspects of Iranian behavior. This includes a number of alleged Iranian attacks and assassination attempts on European soil. In early January, the European Council added an Iranian intelligence unit and two of its staff to the EU terrorist list, a decision that results in measures such as asset freezes. The Dutch government also published a letter that left open the possibility of further sanctions. These targeted measures will have little economic impact, but as the Danish Foreign Minister, one of the driving forces behind the decision, noted on Twitter, it sends a “strong signal from the EU that we will not accept such behavior in Europe.”

These measures were necessary and justified. Nonetheless, they undoubtedly come at a precarious time for Europe’s efforts to sustain the nuclear deal, and risk strengthening the perception in Iran that Europe is a closed market and missed economic opportunity. Europe’s Iran strategy increasingly looks like a balancing act.

Another test facing Europe’s Iran policy concerns its unity and coherence, as the United States has decided to host an international Middle East summit, expected to focus principally on Iran, in Poland. This is a move that by many, especially in Iran, is seen as a deliberate attempt by the U.S. administration to undermine EU unity on Iran. Poland, an EU member, has been particularly uncomfortable with the growing clash between the EU and the United States over Iran and receptive to U.S. proposals, as it is heavily dependent on U.S. security cooperation and lobbies for new US military deployments on its soil. As some observers have pointed out, the U.S. move seems targeted more against Brussels than Tehran.

All of this points to a set of challenges to the EU: launching a meaningful trade effort, maintaining diplomatic goodwill with Tehran and maintaining a united position on Iran in the face of U.S. pressure, while also reacting to Iran’s transgressions.

Striking that balance is not inherently impossible. European leaders should take decisive action against threats to Europe’s interests and security, especially on European soil. And as European officials, including the Danish Prime Minister, have emphasized in the wake of the latest sanctions, preserving the nuclear accord remains a core objective. It is worth remembering that while the EU lifted nuclear sanctions on Iran pursuant to the Joint Comprehensive Plan of Action, it has kept a number of measures in place in for other purposes, such as addressing Iran’s human rights record. Meanwhile, the United States is urging its European allies to do more to address other aspects of Iran’s behavior beyond the nuclear file, including its missile program, which some member states seem willing to do.

But to be seen as a credible actor, the EU must succeed in making good on its promises as well as on it threats. Doing so would also place it in a stronger position to ask more of Iran in terms of meeting European expectations on missiles and regional activities. This is the broader reason for why measures to protect trade with Iran, and thereby make good on commitments under the nuclear deal, are critical to European diplomacy. And to that end, launching the SPV is a key test.

Finally, the summit in Poland highlights the need for EU to speak in unison. So far, the official responses to the summit have been muted. The E3 countries seem hesitant to attend, while EU High Representative Federica Mogherini has bowed out because of “a previous travel commitment.” Instead of tiptoeing around the issue, the EU should re-state its Iran policy ahead of the summit. Europeans should send a clear message to its international partners: the JCPOA is an international agreement, it remains critical for European security, and the EU will not join a maximum pressure campaign against Iran. As pressure grows on Europe, a clear statement of intent could reaffirm Europe’s commitment to principled engagement and diplomacy.


The opinions articulated above also do not necessarily reflect the position of the European Leadership Network or any of its members. The ELN’s aim is to encourage debates that will help develop Europe’s capacity to address pressing foreign, defence, and security challenge.