It’s Mogherini Versus the World in Salvaging Iran Deal

Federica Mogherini is determined to rescue the Iran deal.

But as she and her EU foreign affairs team put on their bravest face with a lot of resolute talk around Brussels’ fabled “blocking statute” – designed to shield European companies from the extraterritorial reach of looming American sanctions – there’s cold comfort on the continent.

Not surprisingly, few of Mogherini’s European partners are convinced that a mechanism intended to compel their companies – most with immense U.S. exposure – to continue doing business with the Iranian regime and risk massive U.S. sanctions is a realistic option.

In the four weeks since President Trump announced his decision to withdraw the U.S. from the JCPOA, European leaders, policymakers and businesses have transitioned smoothly through four of the five classic stages of grief, turning from the big shock on May 8, to anger, to disappointment and finally to acceptance.

The bargaining stage, of course, took place prior to President Trump’s decision, as the EU3 signatories to the JCPOA – France, Germany and the UK – all franticly tried to alter his course.

It only took President Emmanuel Macron nine days to come to terms with the new reality. On May 17, he said, “We are not going to launch a strategic or trade war against the United States on the issue of Iran. … We are not going to constrain French companies to stay in Iran.…The French president is not the CEO of Total,” Total has already stopped work in Iran. Other French companies like the shipper CMA-CGM, gas giant Engie and even Peugeot – a long-time Iran business partner but with ambitions to enter the U.S. market - have also began winding down operations in Iran.

On the same day, Chancellor Angela Merkel was similarly realistic. “I think we ought not to give rise to any illusions here” she said when asked if Germany would try to compensate European companies if they were hit by U.S. sanctions for Iran investment. Again, several German flagships, including Allianz, DZ Bank, and Siemens, have indicated that time’s up for their Iran ties.

In the UK, too, neither Prime Minister Theresa May nor Foreign Minister Boris Johnson have sought to wade back in to the fray.

Other European countries have followed the prevailing trend of pragmatism established by their big EU neighbors. Last week, after some tentative steps toward Iran ties initiated by its two big banks during the “full” JCPOA, Czeska Sporitelna and CSOB, the Czech Foreign Minister confirmed, “no bank in the Czech Republic is ready to finance exports in Iran.”

And Poland seems to have departed from the EU line altogether when the Foreign Minister urged the EU have “more empathy” toward the U.S. position. PGNiG, Poland’s biggest oil refiner recently confirmed it would be ceasing Iran ties.

National trade associations – which during the three years of JCPOA-Max participated in virtually every pro-Iran business conference and every trade mission to Iran – have conveyed similarly rational sentiments. Belgium’s Wallonia Export-Investment Agency (Awex) likened President Trump’s decision to a “sword of Damocles,” dangling precipitously over potential trade – hardly an image designed to coax Walloon firms into investing in the Islamic republic.

Most strikingly of all, even the EU’s own investment arm, the European Investment Bank (EIB), has recoiled at the prospect of risking White House sanctions.

So for the beleaguered Ms. Mogherini and her EU confreres – who remain ensconced between anger and indignation – there’s no united European bulwark to stand up against President Trump. She will struggle – in vain – to persuade reluctant heads of state and their foreign ministries, risk-averse CEOs and their compliance officers, trade associations, European banks and credit agencies that the deal is worth saving – even if it means enormous White House penalties.

And as we see, big European firms have already explicitly said they’re finished in Iran, blocking statue or no blocking statue.

Ultimately – and even during JCPOA-Max when the U.S. was a full party to the agreement – the decision for EU firms has always been binary: you can do business in Iran or in the United States, but not both. Only with President Trump’s explicit withdrawal has this choice been thrown into its sharpest relief.

Daniel Roth is Research Director at United Against Nuclear Iran (UANI).