On November 5, 2018, the U.S. Treasury Department’s Office of Foreign Assets Control announced its “largest ever single-day action” targeting the Iranian regime. OFAC sanctioned more than 700 individuals, entities, aircraft, and vessels, according to the press release. These new sanctions followed the decision of President Donald Trump to withdraw from the Joint Comprehensive Plan of Action (JCPOA) — the Iranian nuclear deal — in May 2018. The U.S. government expects this action to aid in pressuring Iran to give up its nuclear program, to abandon its ballistic missile program, and to cease its involvement in regional wars such as in Syria and in Yemen.
Contrary to the 2012 round of sanctions against Iran, the U.S. is struggling to find international support for the latest sanctions. The U.S. decided to pursue this action unilaterally, against the advice of its European and global allies, and without a formal United Nations Security Resolution. The latest round also includes certain waivers — China, Taiwan, South Korea, Japan, India, Italy, Greece, and Turkey are still able to import Iranian oil for up to 180 days, according to Secretary of State Mike Pompeo.
The European reaction
The dissatisfaction of Europeans leaders over the unilateral American sanctions marks continuity with Europe’s frustration with Trump regarding Iran. Angela Merkel and Emmanuel Macron, the leaders of two of the P5+1 countries, unsuccessfully tried to persuade Trump not to withdraw unilaterally from the Iranian nuclear deal in May 2018. In the aftermath of the decision, The European Union Foreign Affairs Council unanimously affirmed its commitment to the JCPOA. To that end, in September, the E.U. High Representative for Foreign Affairs and Security Policy, Federica Mogherini, announced the creation of a Special Purpose Vehicle (SPV) to bypass U.S. sanctions against Iran.
The SPV is essentially a sophisticated barter mechanism in which European importers would not directly transfer currency to Iranian exporters — a violation of sanctions. Instead, imports from Iran (predominantly oil) would earn Iranian firms credits which they could redeem for European exports, bypassing the financial system and, in theory, U.S. sanctions. The challenge Europe faces is finding a host country for the SPV, a country whose banks may incur the brunt of U.S. action over a sanctions violation, such as a ban from operating stateside.
The E.U.’s two most powerful members, France and Germany, are trying to push Austria to host the SPV, but the country has resisted so far — the country’s three largest trading partners are fellow E.U. states, Switzerland, and the United States, so any American retaliation will sting. Iranian diplomats support the idea of an SPV or another method for Europe to dodge U.S. sanctions, with talks moving forward between Tehran and European diplomats.
A new dilemma for Europeans: Iran and terrorism
The E.U. may simultaneously find itself on a collision course with Iran over terrorism issues just as negotiations over an SPV heat up. On November 18, 150 members of European Parliament raised the possibility of sanctions on Iran for the country’s sponsorship of terrorism and castigated the E.U. for its silence on the issue. The protest came in light of evidence that Iran may have been behind a plot to assassinate an activist in Denmark and a plot to bomb at a rally near Paris. At a meeting in November, the Foreign Affairs Council reiterated its “full solidarity” to E.U. members that were the target of Iran’s “unacceptable behavior on European soil.” Mogherini affirmed that the council “will take forward some work to explore appropriate targeted responses in light of what has happened in Danish territory.” This uncertain situation will further weaken the European effort to maintain some economic relations and the JCPOA agreement with Iran.
Other international players
While Europeans struggle to adopt a cohesive strategy toward Iran, other major international players are adapting to U.S. sanctions. Russia and China, already collaborating with the E.U. on the SPV, are strengthening their economic ties with each other. While steadily decreasing its oil imports from Iran, China is now importing at a record high from Russia instead. America’s unilateral action is creating a vacuum that Russia may be able to exploit by opening a dialogue with the Iranian government on security issues. Russian collaboration with Iran in this arena could lead to a broader partnership between the two countries in the future.
New sanctions, new problems
This new wave of U.S. sanctions was expected by the international community. However, the U.S. decided to act unilaterally, with little or no consultation from its allies, making the sanctions unpopular among Europeans and other key allies. The U.S. stance on Iran, on the one hand against nuclear proliferation and on the other hand against the JCPOA, widens the rift between the U.S. and the other players in the international community.
Europeans, in light of suspicion toward Iran’s foreign activities and to avoid possible U.S. retaliation, will probably not implement a solution to circumnavigate the sanctions — but indicators seem to suggest that Europeans are losing their patience with their American ally. European leaders, despite the internal crisis that they are facing, are still looking for cooperation on crucial issues such as economy and defense. Europe, and the world, needs the leadership of the United States — but at the same time, the Americans need to understand that they too need allies because, in this increasingly globalized world, cooperation between liberal states is the best solution we all have for a prosperous future.