Sunday

29th Mar 2020

Iran: EU and Trump mark divorce on world stage

  • US leader Donald Trump scrapped the Iran nuclear deal last May (Photo: whitehouse.gov)

Europe's split with the US on foreign policy has widened after three EU states created a new company designed to skirt US sanctions on Iran.

Britain, France, and Germany registered the new entity, called an Instrument in Support of Trade Exchanges, or Instex, in Paris on Thursday (31 January).

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  • Iran's Javed Zarif speaks to EU diplomats at security conference in Munich, Germany, in 2014 (Photo: securityconference.de)

It is to be managed by a German former banker, Per Fischer, and is to start trade in food and medicine with Iran in the next few months, excluding US banks and US dollar transactions, in a way that removes the legal basis for the US to sanction firms which take part.

The move was announced by Britain, France, and Germany at an informal EU foreign ministers' meeting in Romania.

It comes after months of EU complaints that US leader Donald Trump's decision to reimpose sanctions on Iran last May would wreck a nuclear arms control deal agreed with Tehran in 2015, prompting a nuclear arms race in the Middle East.

It also comes amid a laundry list of other EU scraps with Trump - on Nato, Russia, Syria, Israel, free trade, and climate change - as well as the US leader's verbal tirades against Europe.

Instex would facilitate "legitimate trade between European economic operators and Iran" and would be "open to economic operators from third countries who wish to trade with Iran" in future, Britain, France, and Germany said in a joint statement.

The idea is to use it to trade oil and gas down the line.

But the project has a wider potential to "teach its managers lessons that can be applied to other cases [besides Iran] in the future," Jarrett Blan, a former state department official now with the Carnegie Europe think tank in Washington, said earlier this month.

The US has also threatened to punish British, Dutch, French and German companies taking part in Russia's plan to build a new gas pipeline to Germany, called Nord Stream 2.

For Heiko Maas, the German foreign minister, Instex was primarily a "precondition for us to meet the obligations we entered into in order to demand from Iran that it doesn't begin military uranium enrichment".

France's Jean-Yves Le Drian said in Bucharest it was "a political act ... a gesture to protect European companies".

"Registration is a big step, but there is still more work to be done," British foreign minister Jeremy Hunt said.

The Instex move was welcomed by EU foreign relations chief Federica Mogherini and by Iranian foreign minister Javad Zarif, who called it "a long overdue first step".

Failure foretold

The US state department said it would fail, however.

"As the president has made clear, entities that continue to engage in sanctionable activity involving Iran risk severe consequences that could include losing access to the US financial system and the ability to do business with the United States or US companies," it said on Thursday.

US ambassadors in the EU, such as the one in Brussels and the one in Berlin, have being saying the same in contacts with CEOs of European firms.

Leading EU companies, including German engineering giant Siemens, German chemicals firm Basf, and French oil and gas firm Total have pledged to quit Iran in response.

The exodus of EU and US firms leaves Iran open to Chinese and Russian investors instead.

"At the end of the day, it will be companies that decide whether or not they want to work in Iran, bearing in mind the risk of American sanctions," Belgian foreign minister Didier Reynders said in Bucharest on Thursday.

The 2015 nuclear arms control treaty does not cover Iran's ballistic missile programme, human rights abuses, or other problems, such as Iran's recent attempts to assassinate regime opponents in Denmark and France.

The EU, earlier this month, blacklisted two Iran regime members and part of the Iranian ministry for intelligence and security over the Danish and French plots.

Same direction?

"We're clear: This commitment [the 2015 nuclear deal] does not in any way preclude us from addressing Iran's hostile and destabilising activities," Hunt, the British foreign minister said.

It was "essential we show our American colleagues that we are going in the same direction as them" on other aspects of Iran foreign policy, Belgium's Reynders added.

Trump's presidency has marked the worst rift in the transatlantic alliance in the past 70 years of its post-WW2 history despite the EU politeness, however.

It is also likely to leave a bitter after-taste even when he, one day, departs.

"The way in which ... the American administration makes policy in general at the moment, with a lot of sanctions, with the fact that international agreements are scrapped, is not a good way to cooperate," Annegret Kramp-Karrenbauer, the head of the ruling CDU party in Germany, told Bloomberg, a US news agency, last week.

EU firms in Iran caught between US and Europe

European companies with business in Iran appear caught in a tug of war between the European Union and Washington. The US demands they leave Iran or face sanctions. The European Union says remain in Iran or face penalties a home.

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Partial resumption of EU trade should be enough to stop Iran from "escalating" a Middle East nuclear dispute, Europe has said, after the US threatened to make Iranians "eat grass".

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