Given the threat of secondary sanctions, the question posed is whether Washington is willing to take on European companies to enforce it economic embargo on Iran. However, the opposition question may also be valid, as Europe could threaten a trade standoff with Washington. There is the Cuban precedent.
President Trump’s threat on Europe on Tuesday was subtle but unmistakably clear. “Any nation that helps Iran in its quest for nuclear weapons could also be strongly sanctioned by the United States,” Trump warned.
Trade is considered help and could trigger secondary sanctions, forcing European companies to choose whether they want to trade with either the United States or Irean. The Director of the German Chamber of Commerce and Industry, Volker Treier, was swift to note on Tuesday that US sanctions on German companies would create a broad climate of economic insecurity, DW reports.
The US is targeting Iran’s oil trade and dollar trade, which is central to the country’s banking system. If Washington moves swiftly and effectively on both fronts, then the Iran deal will no longer be delivering economic benefits to Iran. Europe will have lost the chance to save the agreement as Iran will no longer have an incentive to honour the deal. Brussels now has leverage, not least because European companies have replenished Iran’s economy with billions of Euros in Foreign Direct Investment and remains a key market for the Islamic Republic’s oil.
Brussels could move to shield individual European companies from US pressure by deploying its so-called “blocking statute,” banning EU companies from complying with Washington’s sanctions and protecting them from penalties imposed by overseas courts. This nuclear option has not been used but remains on the table.
There is a precedent. Washington issued a similar threat against European companies in 1996 over Cuba. The EU evoked the “blocking statute” and the Clinton government backed down.
According to Reuters, Brussels is considering it and a final decision is expected at the European Summit in Sofia on May 17. Right after the summit, European Energy Commissioner Miguel Arias Canete is expected in Tehran for consultations on May 18.
The EU could open a credit line to Iran in Euros and continue to absorb Iranian oil; Italy already has a €5bn credit line for investment in the Islamic Republic. These combined moves would keep the agreement afloat. The question is whether all EU 28 have the consensus to play hardball with Washington.