Page 9 - MEOG Week 16

MEOG PoLiCy MEOG
Europe struggling to salvage Iran nuclear deal
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EUROPEAN leaders’ efforts to salvage the 2015 Iran nuclear agreement, aka the Joint Compre- hensive Plan of Action (JCPOA), hang in the bal- ance as their flagging bid to maintain economic links with Tehran in the face of US sanctions prompts growing Iranian non-compliance with the deal.
Europe vowed to save the UN-backed JCPOA – which offered Iran sanctions relief in exchange for scaling back its nuclear programme – after the US unilaterally withdrew from the agree- ment in May 2018 and re-imposed sanctions. Washington argued that the JCPOA failed to address Iran’s ballistic missile programme and “malign” influence across the Middle East – essentially support for militant Islamic forces, such as hezbollah in Lebanon and hamas in the Palestinian territories.
The European Union, however, has been una- ble to prevent a severe slump in Iranian trade. From January to September 2019, Europe’s exports to Iran fell by 50% while its Iranian imports plunged by over 90% compared to the same period the year before. In addition, Iran has seen overall foreign direct investment more than halve since the return of US restrictions on commerce.
Washington’s imposition of secondary sanc- tions has frustrated Europe’s efforts to main- tain economic ties as the measures apply to non-American entities. European companies are deterred from conducting dollar-denominated transactions with Iran, especially if they have exposure in the US, as doing so could result in financial penalties. An EU blocking statute pro- hibiting compliance with the US measures has gained little traction and a barter-based trading mechanism, Instex, designed to circumvent the restrictions, has had little impact.
Instex, a special purpose vehicle conceived over a year ago by Britain, Germany and France, has encountered delays; bureaucratic and sanc- tions-related. At the same time, its intended exchange of EU products for Iranian oil and gas has been limited to the provision of humanitar- ian goods, largely because of US threats to sanc- tion the project.
President Donald Trump’s tough enforce- ment of US sanctions, meanwhile, has sent the Iranian economy into a tailspin. And with little in the way of compensating European economic support, Iran began breaching the JCPOA last year through the enrichment of its stockpile of uranium. The violations culminated in early January when Tehran said it would scrap enrich- ment limits.
dispute mechanism triggered
Subsequently, Britain, Germany and France triggered the JCPOA’s dispute resolution mech- anism, which allows for up to 65 days of media- tion. If discussions fail to persuade Iran to meet its obligations, UN sanctions could be re-im- posed and the deal would be dead in the water.
Faced with such a prospect, the EU said in February that it would extend the dispute res- olution period indefinitely, aware that it may not secure Tehran’s compliance until Iranian trade with Europe is much improved. Iran will press hard for the latter because the coronavirus (COVID-19) pandemic’s impact on the country, where there is the worst outbreak of the virus in the Middle East, has piled yet more pressure on its sanctions-wracked economy.
Last month, Instex and its Iranian counter- part, STFI, finally completed their first piece of business, namely the export of medical equip- ment. The Europeans have promised more
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