EU Mulls Strategy to Shield Firms Against US Threats

Europe has to decide what to do in case the US makes good on its threat to withdraw from the Iran nuclear deal and reimpose sanctions on Iran.

The alternative is to agree to tighter terms proposed by Washington that could hit European companies. The EU says it fully supports the nuclear deal and some analysts and MEPs say it should not cave in to pressure from Washington. Others, however, say it should comply with demands from its biggest security partner.

In light of growing concerns in the business community, an EU spokesperson told London-based media platform EURACTIV that the bloc always seeks to protect the interests of its companies.                       

“We would not speculate about hypothetical situations. The EU always seeks to protect the legitimate interests of its economic operators,” the spokesperson said when asked whether the bloc has a contingency plan to protect European investors if Washington ultimately decides to pull out of the deal reached in July 2015.

After almost two years of delicate negotiations, China, France, Russia, the UK and the US, plus Germany–known as P5+1–and EU agreed with Tehran in Vienna, Austria, on the Joint Comprehensive Plan of Action to rein in Iran’s nuclear program in exchange for relief from nuclear-related economic sanctions.

But the administration of US President Donald Trump has called the deal an “embarrassment” that is not in the US national interest and needs to be “corrected”.

“This is the last chance … I hereby call on key European countries to join with the United States in fixing significant flaws in the deal … If other nations fail to act during this time, I will terminate our deal with Iran,” the US president warned last month.

“If Iran does not comply with any of these [new] provisions, American nuclear sanctions would automatically resume.”

For its part, the EU has stated it will remain “fully committed” to implementing the nuclear deal. Brussels has stood by the International Atomic Energy Agency, which has conducted numerous inspections in Iran and said that the country has complied with all its commitments.

“It is a deal that prevented a nuclear arms race in the Middle East, next to us. That brought security in the region and to young people in the country. That was the European way and it was thanks to us because we were the mediator,” EU foreign policy chief, Federica Mogherini, said recently.

But the EU business sector is anxious that American sanctions would affect EU companies that operate in Iran and also have commercial activities in the US.

   EU Businesses Worried

Luisa Santos, director for international relations at Business Europe, which represents EU-based enterprises, said that the business community backs the nuclear deal.

“If one of the partners decides to consider putting into question that agreement, therefore deciding on additional sanctions on Iran that do not take into account what the other partners are doing, that creates a problem for us,” Santos said.

She added that the problem lies in the extraterritorial nature of the US sanctions, under which companies that are in any way involved with the US might be affected even if the EU maintains the current situation.

 “It’s a factor of risk that we have to take into account,” she insisted.

   Need for Contingency Planning

According to Steven Blockmans, the head of EU foreign policy at the Center for European Policy Studies, the EU will be “forced” to act independently of the US on JCPOA.

“Just like it had to do when the US walked away from the Paris climate agreement, UNESCO and the Middle East peace process by recognizing Jerusalem [Beit-ul-Moqaddas] as the capital of Israel,” he said.

Blockmans noted that the EU institutions, France, Germany and the UK should stand firm in support of the principle of “pacta sunt servanda”, one of the cornerstones of international law.

“The EU should remind the US that it should stick to its own commitments and not undermine the authority of the UN Security Council, which signed off on the nuclear deal by including the text in an annex to a legally binding resolution.”

As for the economic implications, Blockmans stressed that if and when new US sanctions come into effect, EU companies will face a binary choice: doing business in Iran or continuing operations with a US dimension.

“Without European protection of their investments against the long arm of US sanctions, companies are likely to stop trading with Iran. This is not in the interest of the EU and its member states. They should, therefore, start contingency planning,” he said.

The same view is shared by Knut Fleckenstein, the vice president of the Socialists and Democrats in the European Parliament, who believes that the bloc must be prepared for US foreign policy priorities to have an impact on European policy.

“The EU definitely needs a plan B to protect EU companies in this worst-case scenario. It is the commission’s duty to prepare such a plan and to have it ready to hand when needed. Of course, I hope the plan never needs to be applied and that President Trump rethinks his current approach,” Fleckenstein said.

The German MEP stressed the deal’s significance for security in the region, as well as in Europe.

“Iran-related concerns lie outside the JCPOA and should be addressed separately and in the regional context,” he said.