If you thought the build up to America’s exit from the Iranian nuclear deal was exciting, the aftermath is proving to be even more of a show. Iran has found itself in a bit of a pickle since President Trump pulled the US from the Obama-era Joint Comprehensive Plan of Action (JCPOA).
The first round of sanctions are expected to come back in early August, and will target Iran’s automotive sector, trade, and gold and other key metals. The remaining US sanctions will snap back in early November, which include the energy and petroleum sector.
The looming threat of returning sanctions has had a devastating effect on the economy of the Islamic Republic. The Iranian rial has dropped to less than half of what it was worth seven months ago. Additionally, in preparation for the reactivation of sanctions, the country’s authorities issued widespread bans on imports for items that could be made in-country in order to motivate domestic production. Over 1,300 items have been blacklisted so far. This move has drastically reduced the availability of a wide range of products in Iran, including many basic ones such as home appliances, furniture, and even healthcare supplies. Add all this to building discontent that’s been brewing against the regime for a long time, and it’s not surprising the world is witnessing the largest wave of civil unrest in years.
If problems on the home-front weren’t enough, Iran now has to deal with a serious diplomatic challenge.
JCPOA was a joint treaty between several nations. Being the main initiator and backer of the deal, the United States’ pullout severely threatened its long-term stability. Thus, Iranian leaders have been using a combination of political outreach and threats to urge members of the flimsy coalition to stay together. President Rouhani recently took a brief European tour to strengthen ties between the specific nations, and the continent at large (the other major signatories of JCPOA being Germany, France, Russia, and the UK). The Iranian leader flew to Vienna, Bern, made some disparaging remarks on Israel’s existence (despite Swiss President Alain Berset’s insistence that civility be kept on the topic of the Jewish state), and returned to Tehran.
Following Rouhani’s “peace mission,” the country’s foreign ministry helped arrange a last ditch attempt to keep European and other JCPOA participants in accord with the deal. Iranian state media reported Tuesday that Foreign Minister Mohammad Javad Zarif would meet in Vienna with his counterparts from Britain, China, France, Russia and Germany to discuss the future of the deal.
Iran has reason to be nervous. US policymakers have been rather explicit in their intentions. “Our goal is to increase pressure on the Iranian regime by reducing to zero its revenue from crude oil sales,” said Brian Hook, who has led Trump administration discussions with European allies on the sanctions. “We are working to minimize disruptions to the global market but we are confident there is sufficient global spare oil capacity,” Hook explained. As far as accommodating countries that want to continue business as usual with Iran, America will be flexible, but barely so. “We are prepared to work with countries that are reducing their imports on a case-by-case basis, but as with our other sanctions we are not looking to grant waivers or licenses.”
For over a decade, American economic penalties on the Iranian regime have had a detrimental effect on the country’s trade with other nations, especially Europe. As a recent report on Iran by the The Vienna Institute for International Economic Studies indicated, penalties on Iranian goods—including those outside the oil sector—have consistently resulted in huge decreases in Iranian exports globally since 2007.
In response, Iranian leaders have threatened the remaining JCPOA members (and essentially the whole world) that it will return to pre-deal production levels of enriched uranium should the deal fall apart.
So what exactly does Iran want from Europe?
In essence, it wants the EU to guarantee there will be no consequences on the continent resulting from the US decision to pull out of the JCPOA treaty.
If that sounds like a strange demand, that’s because it is.
Kid Gloves Off
It’s hard to understand what Iranian leaders expect from Europe.
America is quite determined to ensure Iran feels the burden of these sanctions and doesn’t weasel its way out. American leaders are crafting a policy in which companies will have to choose between engaging with the US economy, or trading with Iran. Earlier this month, Trump warned European enterprises that they would face secondary sanctions if they violated US restrictions on doing business with Tehran. Anyone hoping to see the deal survive is caught between a rock and a hard place.
European leaders eager to keep Iran from exiting the deal have put forward several proposals to allow European finance to bypass American sanctions. All have been met with skepticism by EU states, as members are currently trying to negotiate numerous other trade disputes with the Trump administration with hundreds of billions of dollars in trade on the line.
In the end, it will come down to simple numbers. Trade with the US is worth something in the range of $435 billion to the European continent. By comparison, Iran is only the bloc’s 66th biggest trading partner with less than $24 billion of goods exchanging hands annually.
Iran is essentially asking the EU to risk damaging half a trillion dollars in business in order to accommodate them.
Digging their Own Grave
What is truly shocking about Iran’s actions in the recent period is that leaders seem to be making no efforts whatsoever to portray themselves as a stable international partner.
Two incidents from just the past week show that Iran remains as dysfunctional as ever.
While Tehran is asking the world to remain an unfettered participant in international commerce, the Financial Action Task Force—the primary international body that monitors financial crime—is threatening to blacklist the Iranian government as complacent in global financial crime. Iran has been on the FATF list before. After years of committing to the organization’s standards, the FATF returned the country’s status to normal. Now, after mounds of evidence showing trends for money laundering, and terror financing (perhaps referring to the hundreds of millions Iran has pumped into Hezbollah and other militant groups for decades), the Task Force is considering bringing Iran back to its former status.
FATF gave Iran three months to produce evidence it is clamping down on these activities or its name will return to the blacklist. This news will no doubt further diminish Iran’s attractiveness to investors, not good news for a country whose foreign direct investment has fallen in the past several years.
Shortly after the FATF released its report, news broke regarding the arrest of several Iranians, including terror charges for one Iranian diplomat stationed in Europe.
According to Belgian authorities, police in Brussels intercepted two suspects last Saturday, with 500 grams of TATP, a home-made explosive produced from easily available chemicals, as well as a detonation device found in their car. Reportedly, the investigation into the pair uncovered a plot to attack the early July conference of the Paris-based National Council of Resistance of Iran (NCRI)—an umbrella bloc of opposition groups in exile that seek an end to Shi’ite clerical rule in Iran. As part of their work, NCRI reports on all the various mischief Iran busies itself with around the world.
European authorities then uncovered the involvement of one Iranian diplomat identified only as Assadollah A, typically stationed in Austria but arrested in Germany. Austria has since stripped the man of his special diplomatic status.
While investigations are ongoing, Iranian authorities are making light of the entire incident, explicitly accusing European countries of fabricating the whole story. Iran’s foreign ministry called the case a “false flag” designed to vilify Tehran. “How convenient: Just as we embark on a presidential visit to Europe, an alleged Iranian operation and its ‘plotters’ arrested,” Foreign Minister Zarif tweeted.
Of course the possibility of an anti-Iran conspiracy is absurd—such a thing would require the collusion of multiple European countries, including Germany, one of the loyal backers of JCPOA. Additionally, from a diplomatic perspective, one would think Iran would show some receptiveness to the nations it wants to partner with, not accuse them of lies and deceit when they claim they’re under attack.
In summary, Iran’s actions are driving the nation into further isolation on many fronts. The question at this point is how will Europe respond? Will they responsibly state they’ve had enough and will no longer cater to Iran’s manipulation and aggression, or will they continue to placate the Ayatollahs, further extending the leverage the Islamic Republic has over global powers?