The coming clash: Why Iran will divide Europe from the United States
Europe must salvage the nuclear deal with Iran and step-up robust diplomacy with Teran on regional issues
Policy recommendations
European governments and the EU should safeguard the JCPOA and vigorously plan for contingencies should the US continue to backtrack on the nuclear deal. This should primarily focus on legal, political, and economic measures that can ringfence European companies from the enforcement of US secondary sanctions.
Europe should also pursue the political openings created by the nuclear deal to engage in tough diplomacy with Iran on non-nuclear issues. The most promising areas for tangible, albeit incremental, progress include: freedom of navigation in the Persian Gulf, reducing the violence in conflicts in Yemen and Syria, and lowering tensions in Iraqi Kurdistan.
The EU should facilitate dialogue with regional powers with the aim of creating greater transparency over ballistic missile capacities in the Middle East.
European countries and the EU should further nurture the channels they have developed with the Iranian leadership to help counterbalance the impact of Donald Trump’s polarising narratives on regional developments.
Introduction
Donald Trump is not easy to get along with. On many global security issues, Europeans take very different approaches than the new American president. But perhaps nowhere is the difference more profound than on the question of Iran. Given the president’s harsh rhetoric and his recent efforts to put that talk into practice, a transatlantic clash on the issue seems almost inevitable. European countries should prepare now to minimise the damage and preserve their strategic interests on non-proliferation and the pursuit of stability in the Middle East.
Trump wants to shift US policy on Iran towards aggressive containment and away from the diplomatic openings created by his predecessor. The primary focus of this shift is the Joint Comprehensive Plan of Action (the JCPOA), a multilateral nuclear accord to limit Iran’s nuclear programme which Trump has called an “embarrassment” and “disastrous”.[1] The US president has also consistently condemned Iran as a “fanatical regime” and “rogue nation”, placed expansive travel restrictions on Iranian nationals, and urged other nations to isolate the country.[2] His administration has unambiguously sided with Iran’s regional rival, Saudi Arabia, in addressing the conflicts in the Middle East.[3]
In October, the White House released a revised US strategy towards Iran, with a heavy focus on “neutralizing” Iran’s “destabilizing influence and constraining its aggression” in the region.[4] Trump also decided to ‘decertify’ Iranian compliance with the JCPOA, meaning that he will not attest to Congress that Iran is abiding by the terms of the deal. In response, the heads of state and government of France, Germany, and the United Kingdom released a rare joint statement expressing concern at Trump’s policy.[5] The process surrounding the nuclear deal has already strained transatlantic ties and, as the European Union foreign policy chief Federica Mogherini warned, reduced the credibility of the US as a partner for future European policy on Iran.[6]
The current trajectory not only endangers European non-proliferation goals, but it also heightens the risk of a nuclear arms race and further military escalation in Europe’s backyard. Direct or indirect confrontation between American- and Iranian-backed forces across the Middle East will further fuel the regional conflicts, particularly in Iraq and Syria, that have already imposed heavy costs on Europe.
European leaders do share many of the concerns of the US with regard to Iran. But they take a strikingly different approach from the Trump administration to dealing with Iran. They consistently voice unanimous support for the JCPOA and broadly favour similar multilateral engagement to address outstanding areas of grievance with Iran.[7] European leaders have warned that ditching the nuclear deal, as Trump has threatened to do, would make it much harder to resolve other disagreements with Iran.[8] Moreover, some European officials privately say that isolating and excluding Iran from the international community may cause more hardline elements of the Iranian leadership to “take measures that further fuel regional instability”.[9]
This paper looks at how the Trump administration will seek to implement this new Iran strategy and provides a comparison with the European approach. It outlines the consequences that are likely to follow from a more confrontational strategy toward Iran and examines the implications for European security interests.
It concludes that Europe should not only try to preserve the nuclear deal with Iran, it should also make contingency plans to salvage the relationship with Iran if the US defects. This includes taking measures to protect European banks and companies from US secondary sanctions. In the meantime, however, European governments need to demonstrate that the current diplomatic track can lead to progress on the issues of concern with Iran. They should do so by first leading on or at least encouraging negotiations on issues such as ensuring freedom of navigation in the Persian Gulf, de-escalating the wars in Yemen and Syria, and stabilising Iraq in the aftermath of the Islamic State group (ISIS). Europe will also need to find a pragmatic approach to addressing the concerns with Iran’s ballistic missile programme. European capitals will need to maintain constructive channels with both Tehran and Washington, and resist pressure from the US to once again isolate Iran.
Europe's gradual opening to Tehran
A gradual process of confidence building and rapprochement has been underway between the EU and Iran for several years. A new round of nuclear negotiations began in 2013 at roughly the same moment that Iranian voters elected Hassan Rouhani as Iran’s president. His administration shunned his predecessor’s brash isolationism and anti-Western rhetoric. With the support of the Obama administration, the EU found the political space to thaw relations with Tehran by pursuing economic and political engagement.
The EU and European governments have responded positively to calls from the Rouhani administration to improve relations, and accelerated formerly dormant exchanges with Iran across government organs, parliament, judiciary, and the business sector. Since Iran’s decade of isolation drew to an end in 2103, most EU countries have sent their foreign minister to Iran and officially received Iranian foreign minister, Mohammad Javad Zarif. Shortly after the JCPOA was implemented in January 2016, Rouhani made his first high profile visits to Europe and in April 2016 the EU high representative Federica Mogherini travelled to Tehran with seven European commissioners with the aim of expanding EU-Iran relations. The EU’s ‘Iran Task Force’, established in 2015, has led on European projects with Iran on nuclear safety, energy, educational exchanges, and EU officials have suggested that the European Investment Bank may operate in Iran in the future.10
Countless European trade delegations have visited Iran, with the EU reporting a 94 percent increase in Iran-EU trade in the first half of 2017 from the same period in 2016.[11]
As Mogherini has said, “Europe feels an interest and a responsibility to engage with Iran”, and indeed a growing number of European governments believe that diplomacy with Iran can be an effective means of reducing the violence and instability in the Middle East.[12] But robust engagement with Iran on regional issues has yet to be seriously tested. Those who are fiercely critical of any diplomatic opening with Iran, such as Israeli prime minister Binyamin Netanyahu, argue that negotiations would only create greater space for Tehran to continue actions that destabilise the region.[13]
Republicans in Congress made similar criticisms when the Obama administration, together with European partners, began negotiations with Iran over its nuclear programme.[14] Yet, not only did the talks result in a deal that addressed the most critical security concerns of the West, Iran has also delivered on its commitments. Since this diplomatic process began, engaging rather than excluding Iran on regional issues has at times produced results that are in the mutual interest of the West and Iran. For example, a quiet political exchange between Iran and some European countries, together with local actors, contributed to easing Lebanon’s political deadlock in 2016.[15] The US too has found it advantageous to work with Iran on certain regional issues, such as the anti-ISIS fight. In that case, the US-led forces and Iran have, through the Iraqi government in Baghdad, established a system for de facto military coordination.
However, relations between Europe and Iran remain far from normal. A combination of factors ranging from lingering distrust, mutual disappointment over the lack of progress, and their opposing stances on a number of regional issues have limited the rapprochement.
Divisions between Iran and Europe are on full display in Syria and Yemen where each has backed opposing sides. There are also deep disagreements related to Iran’s support for non-state actors in the region, its arming of Hezbollah, and its position on Israel – and more recently concerns over Iran’s expanding ballistic missile programme. In these areas, Europeans have generally worked with the US.
They have supported, for example, the Trump administration in its complaints to the United Nations about Iran’s ballistic missile tests.[16]
Meanwhile, Iran is frustrated by the paltry level of European investment in the Iranian economy. Increased European investment is a critical piece of the Rouhani government’s effort to attract an annual target of $50 billion in foreign direct investment and to boost job growth.[17] The easing of sanctions since the JCPOA has allowed for an uptick in trade, but Iranian policymakers and the business sector remain disappointed by the level of European investment in Iran.[18]
Financing for such investments is in short supply and most banks in Europe are sensitive to US politics on Iran given the high degree of exposure they have to the US market and regulators.[19] A handful of smaller and state-owned European banks, particularly those in Austria, Denmark, France, and Germany have provided financing for deals and investments in Iran, and some governments such as Denmark and Italy, have provided credit lines to support exports to Iran.[20] However, major European banks, whose financing is needed for longer-term and bigger investments inside Iran, have remained reluctant.[21]
Various expectations and preconditions mean that Europe and Iran risk mutual disappointment in their effort to improve relations. Tehran wants European capitals to do much more to encourage economic exchange, resolve the complex banking deadlock, and to oppose Trump’s attacks on the JCPOA. Similarly, European governments want to see signs of good faith from Iran beyond the nuclear issue, such as less Iranian support to non-state actors and militia groups in the region, greater Iranian pressure on the Assad regime to accept political transition, and less frequent testing of Iranian ballistic missiles.[22] Their Iranian counterparts view such expectations as unrealistic, and at times naive, considering Iran’s domestic politics and a regional environment that is increasingly hostile to Iranian interests.[23]
The clash with Trump
Over the past year, the E3 (the UK, France, and Germany) and the EU have firmly expressed to the US their continued commitment to the nuclear deal. They have made the case that the Trump administration would be isolated on the Iran issue if it chose to walk away from the JCPOA.[24] Some European governments have also said that the JCPOA’s survival is a precondition for their cooperation with the Trump administration on other areas of Iran policy, notably regional issues.[25] They have attempted to persuade Trump that multilateral engagement on Iran is a more effective way to change Iranian calculations than a policy of containment.[26]
Although European capitals share many of the concerns of the US about Iran, Europe is quickly parting ways with the Trump administration over two fundamental issues. First, they disagree on what they are trying to achieve with Iran. Trump’s statements on Iran move US policy aims towards efforts to weaken the Islamic Republic and perhaps to the idea of regime change.[27] The US secretary of state, Rex Tillerson, for example, effectively backed a regime change approach when he outlined that the administration would “work towards support of those elements inside of Iran that would lead to a peaceful transition of that government.”[28] European governments, on the other hand, are hoping to see behavioural change from Iran in ways that promote European security interests and contribute to regional stability.
The second source of European-US differences over Iran relates to the tools used to achieve these goals. European governments are moving away from isolating Iran using containment and sanctions towards engaging the country using diplomatic and economic tools. The Trump administration has moved in the opposite direction, seeking to isolate Iran through political measures and tougher sanctions.
Perhaps the clearest example of this division occurred in May 2017. During Trump’s visit to Riyadh, he called for all nations to isolate Iran. Within hours, the EU high representative together with other European leaders publicly congratulated the re-elected president, Hassan Rouhani, on his victory and expressed hope for further political opening with Iran.[29] Similarly, on the same day as Trump made his speech on the new US Iran strategy, the French president discussed with Rouhani a potential trip to Iran, which would be the first by a French head of state since Iran's 1979 revolution.[30] In parallel a number of giant European companies have ignored Trump’s calls to refrain from doing business with Iran and instead announced new deals with their Iranian counterparts. [31]
Despite these European efforts, there is a broad tendency in Washington among both Democrats and Republicans to assume that European governments can be co-opted or coerced to follow US policy on Iran.[32] US observers believe that, when faced with a choice of doing business with Iran or facing economic US secondary sanctions, European governments and businesses will opt to preserve their US ties. They also tend to believe that, by threatening to adopt a confrontational position towards Iran – to include killing the nuclear deal, pushing for regime change, or even conducting limited military strikes against Iran – the US will coerce Europeans to come on board with less extreme policies, such as renegotiating the nuclear deal or demanding that Iran change its behaviour on regional files. In opposing Trump’s policy towards Iran, European governments find themselves in the unusual position of being closer to Russia and China than to their traditional transatlantic partner.[33]
The US plan: Containment and rollback
Politics inside Washington has created a broad consensus in the Trump administration and Congress on the need to get tough on Iran with the ultimate objective of significantly weakening Iran’s leadership.[34] In October, Trump outlined the new US Iran strategy that has at its heart an effort to derail the JCPOA, and to contain and confront Iran, leaving little political space for diplomacy.
Implementation of such goals, however, will be difficult. As administration officials admit, Iran’s regional footing is stronger now than at any time since the start of the 2003 Iraq war and its ability to impose costs on the region and the US is also greater.[35] Given the new level of the challenge, the administration has had an often fierce debate on how precisely to confront Iran.[36] Currently, it appears that two broad factions have emerged: Donald Trump and everyone else.
(1) Donald Trump
The president has taken every opportunity to broadcast his animosity towards Iran. He has called for the country’s international isolation and sought to pressure foreign companies not to do business with the country.[37] So far Trump has channeled his stated intention to get tough on Iran into attempts to dismantle or undermine the nuclear agreement.
There is little doubt that Trump seeks to undermine the Iran nuclear deal negotiated by his predecessor and world powers. Despite assessments by US generals and eight reports from the International Atomic Energy Agency (IAEA) that verify Iranian compliance, Trump claims that Iran is violating the “spirit” of the deal.[38] In his October speech, he outlined that he was willing to end US participation in the nuclear deal unless it was amended to extend the expiration dates of various Iranian obligations (the so called “sunset provisions”) and to include tougher limitations on Iran’s missile programme.[39]
On regional issues, Trump has already doubled down on US support to Saudi Arabia in its regional feud with Iran.[40] This stands in stark contrast to Obama’s attempt to encourage greater accommodation and compromise between the two regional powers.[41] The US administration has also stepped up backing for the Saudi military campaign in Yemen, in part to weaken Iranian-allied Houthi forces.[42] Trump has sided with Saudi Arabia even where this has put the US at odds with other key regional allies such as Qatar.[43] This followed Trump’s agreement to sell Saudi Arabia $110 billion in weapons, an agreement hailed by the White House as the single largest such deal in US history.[44]
(2) Everyone else
In contrast, some of Trump’s cabinet members, including secretary of defence James Mattis, seem intent on moderating the president’s pronouncements on Iran.[45] Moderation in this context means that, although this camp believes in increasing the pressure on Iranian regime, it also believes that retaining the JCPOA is the best way to do so.[46] It has reportedly pressed Trump to adhere to the nuclear deal to keep allies on board with pursuing a more active and aggressive pushback on Iran across the region.
The views on Iran of many of these military officers in Trump’s cabinet are coloured by their own and the US military’s experience with the Iranian Revolutionary Guard Corps (IRGC) in Lebanon and Iraq.[47] The deep animosity towards the IRGC was reflected in the White House fact sheet on the US strategy towards Iran, which is heavily focused on countering the IRGC.[48] Close advisers to this camp say that they seek to avoid direct military confrontation, but that the US should support covert and overt military pushback against Iranian assets in the region. They tend to favour supporting Arab allies to engage in greater asymmetric warfare against the IRGC and Iranian-backed forces (in particular Hezbollah), together with placing greater economic sanctions on such entities.[49] As a former US official acknowledges, a similar approach was employed in small doses by the Obama administration, but the Trump administration seeks to make it a centrepiece of US policy.[50]
While supporting a more assertive posture against Iran, this camp wants to avoid losing focus on the Trump administration’s priority of fighting ISIS. Senior US officials have reportedly cautioned against looser rules of engagement, which would allow US military commanders to respond more forcefully to the IRGC and Hezbollah forces in Iraq and Syria, out of concern that this would divert attention from the priority of fighting ISIS in the region.[51] There is also a willingness in this camp to engage with Iran where this serves US interests. Tillerson has indicated that he is open to diplomacy with Tehran.[52] In the Department of Defence, there is some support for establishing lines of deconfliction with Iran to avoid skirmishes between naval forces in the Persian Gulf.[53]
Overall, the moderates have swayed Trump to accept a subtler approach to dealing with Iran. Trump seems unwilling to deliver a deathblow to the nuclear deal. He has so far twice used his executive power to renew waivers of sanctions as required under the JCPOA. Instead, the October decision to decertify Iranian compliance with the JCPOA provides a face-saving way for Trump to look tough on Iran but to shift the immediate responsibility over the fate of the nuclear deal onto Congress.[54]
Yet, even if Trump is isolated, he is the president. It remains unclear if he is interested in renegotiating a better deal or simply aims to shut the door to all diplomacy with Iran. Even if Congress does not follow Trump’s decertification of the JCPOA by ending the deal altogether, the US commitment to the agreement is likely to hang in the balance every three months when Trump must decide to re-waive US sanctions on Iran (with the next waiver deadline looming in January 2018). The unpredictability surrounding his position on the nuclear deal, even with his own cabinet members and closest allies, has essentially put the deal in limbo.[55]
As the battle over the nuclear deal between Trump and his cabinet rages on, the US and Iran have stepped up their shadow boxing in the Middle East. On several occasions, Iranian and US naval ships have narrowly avoided incidents in the Persian Gulf.[56] Their respective forces on the ground have clashed in Iraq and Syria,[57] and Iranian drones and US fighter jets have clashed in the air over the Middle East.[58] The Trump administration has sanctioned Iranian entities and persons involved with the ballistic missile programme and observers expect tougher Congressional sanctions on this issue in the coming year.[59]
All of this means that European governments should prepare for increasing tensions between Iran and the US.
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