EU Persistence in Trumpy Times

Very alarming! That was the response of European foreign policy experts after US President Donald Trump made anti-Iran remarks during recent visits to Riyadh and Beit-ul-Moqaddas.

For European business, Iran still constitutes a major opportunity. However, their biggest political risk in Iran is now coming from USA.

The Trump administration has maintained the nuclear deal but dumped Obama’s approach of engagement. Instead it has returned to the previously failed policy of containing Iran’s influence in the Middle East.

Trump seems to have waited until after the Iranian presidential elections and for the US legislative season later this year. A bad signal is the 18-3 vote taken on May 25 by lawmakers on the US Senate Foreign Relations Committee. It was in favor of authorizing the Trump administration to apply more sanctions against Iran over its ballistic missile program and regional policies.

Meanwhile, the nuclear deal and economic engagement with Iran are still prioritized by European states. German, French and Italian policymakers and media have responded very positively to the outcome of the Iranian presidential election.

However, both Trump and strong factions in the US Congress consider trade with Iran as tantamount to strengthening the Iranian political system. Various US unilateral moves aimed at weakening Iran’s position in the region are now likely.

This shift will move the US policy focus away from economic relations to regional security policy. The US will try to further isolate Iranian actors responsible for ensuring Iran’s national security and autonomy. There is unfortunately limited understanding in some policy and media circles about Iranian concerns.

European businesses and banks with US exposure may not be directly affected. However, they may encounter more US obstructionist measures that will try to increase their uncertainty and transaction costs.

Business will have to continue to engage with EU decision-makers and European and non-European banks to ensure insurance, financing and payment channels. They will also have to exercise due diligence to verify that Iranian business partners are not affected by existing and new US measures.

Despite the challenges posed by the Trump administration, European businesses are still operating in a more favorable context than before the nuclear deal. They may want to review their reputational risk management and communications strategy to their stakeholders. However, a long-term view, calm persistence and creative cooperation with solid partners are still the best way forward for them in Iran.

Dr. Heinrich Matthee is a political analyst for companies and a guest researcher of the Amsterdam Centre for Middle Eastern Studies.