Trump Actions Could Spark EU Retaliation Against US Businesses

A decision by US President Donald Trump to back out of the Iranian nuclear agreement could derail billions of dollars in western investments heading toward Iran and trigger European economic retaliation against US businesses, analysts say.

“It signals the breakdown of consensus between the US and its European allies,” Hassan Hakimian, director of the London Middle East Institute, said.

Trump is expected to announce his decision this week to decline to certify the nuclear deal. The 2015 agreement, signed by his predecessor Barack Obama, along with Britain, France, Germany, Russia and China, lifts international sanctions on Iran in return for a long-term suspension of its nuclear development program.

Since the deal was signed, European countries have “been lining up like mad” to trade with Iran, Hakimian was quoted as saying by USA Today.

If the United States takes action that slows the investment pouring into Iran, European governments would antagonize US allies who could retaliate with trade restrictions against American firms.

European governments have urged the United States to stand by the agreement. And Iranian nuclear chief Ali Akbar Salehi on Tuesday criticized Washington’s recent “delusionary negative postures” and hoped the deal would not fall apart.

“Much more is at stake for the entire international community than the national interests of Iran,” he said, adding that he didn’t want the agreement to fall apart.

A decision to decertify won’t mean an immediate end to the agreement, which Trump has called the “worst deal ever.” The US Congress would have 60 days to reimpose sanctions, but analysts say such a vote is unlikely, effectively leaving the agreement in place.

Decertifying means the US believes Iran is not complying with the nuclear agreement, even though there’s no evidence of that, or that the deal is not in the national interest.

Trump has signaled he will back out of the accord before an Oct. 15 deadline for certifying that Iran is complying with the terms, which United Nations inspectors say is the case.

“Decertification will be seen as a warning shot that their [Europeans] investment may come under fire from sanctions,” said Richard Nephew, an analyst at the Center on Global Energy Policy and a former State Department official.

If the deal is saved by the US Congress, Trump’s next opportunity to scuttle the deal will be in January, the next deadline for waivers that have to be issued every 120 days to prevent old sanctions from being reimposed, according to a US domestic stipulation.

US companies have not benefited much from the lifting of sanctions, since the US trade embargo remains in effect. Most of what was lifted were “secondary sanctions” to penalize non-US companies who did business with Iran.

One major exception is Boeing, which has agreements worth about $19 billion to sell aircraft to Iran. The US did lift some primary sanctions for the aviation industry.

But European countries have flooded Iran with trade delegations eager to get a chunk of a potentially lucrative market.

 “It could put European businesses on a collision with the Treasury Department, if sanctions are reimposed,” Hakimian said.

In response to a possible decertification, European nations may look for ways to retaliate against American firms.

“Even the conversation [about decertification] is going to make things really hard if you are a US business operating in Europe,” Nephew said.

EU Ambassador to the United States David O’Sullivan said last month that if the US pulls out of the nuclear agreement, known as the Joint Comprehensive Plan of Action, and reapplies sanctions that target not only Iran, but other countries doing business with Iran, the European Union could take advantage of a statute dating back to the mid-1990s that would protect European companies from being penalized under the sanctions.

Speaking at the Atlantic Center alongside French, British and German ambassadors, Sullivan said, “We have the blocking statute ... which does offer legal protection to European companies which are threatened by the extraterritorial nature of US sanctions in certain circumstances.

“I have no doubt that if this scenario materializes, which it’s not clear it will, the European Union will act to protect the legitimate interests of our companies with all the means at our disposal.”

Because Washington has virtually no trade relations with Tehran, US sanctions against Iran are not an effective nuclear deterrent unless other countries join the effort. In the years leading up to the 2015 nuclear deal, European countries, as well as China and Russia, cooperated with US-led efforts to choke off Iran’s economy in hopes of persuading Iran to negotiate restrictions on its nuclear program.  But now that Iran has scaled back its nuclear program in exchange for sanctions relief, the countries that helped negotiate JCPOA see no reason to cut off trade with Tehran again, Huffington Post reported.