Europe split in confronting the US sanctions on Iran, Washington isolated

French President Emmanuel Macron speaks after receiving the prestigious Charlemagne Prize. Aix-la-Chapelle, 11 May 2018. (French Presidency work – snapshot from a video).

Donald Trump, the ‘America First’ President in withdrawing from the Iranian nuclear non-proliferation deal, doesn’t seem to be honoring his lead electoral motto. It seems that he is serving more the interests of Saudi Arabia and to a lesser extent of Israel. Riyadh has much at stake in its inimical interaction with Iran. Israel on the other hand, despite being more verbally abused by Tehran, doesn’t run any grave dangers from the Islamic Republic. Tel Aviv is very well equipped to politically and militarily defy the Iranians, while the Saudis have to try much harder to make the most out of their oversized military machine and spending.

At the same time, the Iranian affair is to put the US relations with America’s traditional strategic allies, the Europeans, to a hard test. It’s characteristic what Richard Grenell, the new US ambassador to Germany did, only hours after Trump announced the pulled out from the Iranian agreement. He posted a tweet saying, “US sanctions will target critical sectors of Iran’s economy. German companies doing business in Iran should wind down operations immediately.” No need to report how many hundreds or thousands of negative, aggressive and even belligerent reactions he got.

United in opposition

In a rare occasion, the three big European countries, Germany, France and Britain are firmly united in opposing this Trump’s decision. As for Russia and China, who have also co-signed the Iranian Agreement of 2015, they decisively stated they won’t follow Washington’s aggressive step. Tomorrow, Tuesday, the three European ministers of Foreign Affairs are planning to meet in Brussels to seek ways to block the American sanctions on Iran, hindering the European companies doing business with Tehran. However, this may prove difficult despite the fact that the Europeans have been preparing for that. The test case will be the sale of tens of Airbus planes, which the European airplane maker has agreed to deliver to Iran.

According to Reuters, Iran rushed to ask the Europeans if the deal for the commercial aircrafts is to go ahead or Europe is backtracking on it. Understandably, all three European countries have every intention to honor this contract, since all of them have important interests in Airbus. However the American Secretary of Treasury Steven Mnuchin stated last week, that all licenses to companies delivering or intending to sale passenger aircrafts to Iran have been withdrawn, including Airbus and Boeing.

It will be very difficult for all airplane makers to ignore the American ruling, given their large exposure to US markets. The larger the exposure of a company to US, the greater the leverage Washington has on them, under the threat of sizeable fines. The only hope for Airbus to go through with its multi-billion contract with Iran, is to get an exemption from the White House.

Get exempted or evade

It’s not only Airbus though. Hundreds of middle and even small French and German companies have a strong presence in Iran or export goods to the country. Last year, France and Germany delivered goods to Iran of a value of €1.7 billion and €3.1bn respectively. The French minister of Finance Bruno Le Maire has asked Washington for exemptions for some icon French firms like Renault, Total, Sanofi, Danone, Peugeot and others. Reportedly, Paris counts on the perfect relations with Washington it has and the exceptionally good chemistry between the two heads of state.

The Germans are reacting differently but probably more effectively. Handelblatt, the German business newspaper, authentically expressing the country’s business sector, published an article entitled, “Germany to US: We’re ready for your sanctions and we’re staying in Iran”. To support this ‘statement’ it asked Michael Tockuss the President of the German-Iranian Chamber of Commerce how they plan to overcome the US sanctions.

Being set in Tehran

Tockuss had very down to earth Teuton answers: “We’re not shocked. For some time now, companies doing business in Iran have been trying to find substitutes for any US-related aspects of their supply chains. For example, European companies in Iran do not work with dollars at all; they prefer euros or perhaps dirhams. Any US staff members are excluded from Iran-related business. There have been a wide variety of preparations and many companies have been building a fence around their Iran business. As long as the German government leaves us alone, we’re staying.” This is a typical reaction of a German producer, given the solid traditions of the country’s manufacturing sector.

In any case, the European Union as a club is not to follow the US in applying the sanctions against Iran. Federica Mogherini, the European representative for external relations has made it crystal clear, the club is not abandoning the Iranian deal, for as long as Tehran continues to honor it. This doesn’t mean there won’t be some member states to slam Iran. The first candidates are Poland, under the zealous Catholic ‘Crusader’ Lech Kaczyński, President of the Law and Justice ruling party and his like companion Victor Orban, Prime Minister of Hungary.

Apart from those rather insignificant reactions, there will surely appear much more strategically important differences between the big European powers. France and Germany are already acting quite differently in preparing to cope with the soon coming far and wide American sanctions on Iran. As explained above, this is manifest when the problem touches their business relations with the Islamic Republic. In confronting the sanctions, the options of Paris and Berlin depend on the nature of their relations with Washington. In this respect France appears as cooperating with the US by asking exemptions, while Berlin plans dodging.

Macron gives notice to Merkel

Last week, Macron and Merkel met on the occasion of the French President receiving the Charlemagne Prize. In their speeches the differences were evident in respect not only to the Iranian affair but more so in relation to their visions about the future of the European Union. The German Chancellor when it came to foreign policy – an obvious reference to the Iranian problem – appeared much in need for the French support.

According to Handelblatt, she said “in a dangerous world, a common European foreign policy is an ‘existential necessity’”. No question everybody agrees with that. Yet, it’s questionable if Macron is ready to continue supporting Germany in the foreign front, as long as Berlin denies undertaking its responsibilities on the European platform. Berlin has to understand it cannot have it both ways; having the EU as an exclusive export market and a solid political base, but not taking good care of it.

 

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Comments

  1. Orbán is hungarian, not czech.
    Everything else is great and informative!

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