How could EU retaliate if Trump quit Iran deal?
As Donald Trump’s 120day clock ticks away toward his May deadline to “fix” the Iran nuclear deal, two key Obama administration officials emphasized to The Jerusalem Post the pitfalls of the US president’s approach.
More specifically, Jarrett Blanc, former deputy lead coordinator and State Department coordinator for Iran nuclear implementation, and ambassador Laura Holgate, former US representative to the International Atomic Energy Agency and the UN, stressed the dangers of Trump’s aggressive attitude toward Europe.
Blanc focused on the economic side: What if everything goes bust? What if the US scraps the Iran nuclear deal and imposes secondary sanctions on its EU allies for continuing to do business with Iran?
Secondary sanctions would mean that any EU entities that did business with Iran would be prohibited from doing business with the US.
Blanc said the move could potentially hurt the US as much as the EU or at least lead to an economic-legal counterattack. In one scenario, the EU could fight back using various international legal forums in a trade war of sorts.
One path the EU could take, Blanc said, would be to go to the World Trade Organization. He noted that this had played out before.
He said that in the late 1990s the EU launched a case against the US over the 1996 Helms-Burton Act, in which the US penalized foreign companies trading with Cuba.
Blanc said that the case “did not go very far because, after a year to 18 months, the EU and the US reached an agreement where both sides compromised.”
“Largely, the US backed off enforcement of some of its threats” regarding secondary sanctions it had threatened to impose on the EU for continuing to do business with Cuba.
He said the EU’s ability to fight US sanctions before the World Trade Organization was not specifically related to the Iran deal, rather it was a move that could be employed in a range of areas when cooperation has broken down.
Anytime, “there is some regulation which appears to have a valid policy motivation, but has a hindering effect on trade, there can be a case before the WTO. This could apply to environmental regulations, net fishing for tuna regulations” and a variety of others, including nuclear sanctions.
The basic idea is that the WTO can tell a country that “it cannot regulate others in that way,” Blanc said.
Another tact that the EU could use, noted Blanc, would be to use their “blocking regulations.”
He said that in the same period during the 1990s, to deal with the Cuba sanctions issue, the EU passed laws so that “EU regulated entities and individuals could be subject to EU legal liability if they followed US sanctions law.” This would mean the EU would counter-pressure European companies against any pressure from the US.
Part of this strategy could include the EU targeting US assets in Europe “to make EU firms whole which lost money due to US secondary sanctions.”
Besides the general economic picture, he said that it was extremely unlikely that the EU would cut back oil purchases from Iran on a macro-economic basis without a worldwide effort because of the vital role of oil in keeping countries running.
He emphasized that “no one knows how this would really play out,” on a firm by firm level, but his basic message was that, “it would be silly to expect the macro-economic effect on Iran to be equivalent to the macro-economic effect on Iran when there had been a unified approach to sanctions.”
Meanwhile, Holgate discussed whether there was any chance that the EU would unite with the US against Iran on the issues of ballistic missile testing and Iran’s aggressive behavior in the region, and how best to achieve that.
She said: “I do think they would be willing to do more on Iran’s bad non-nuclear behavior if they had confidence they weren’t going to have the rug pulled out from under them down the road.”
Holgate explained that “a stable JCPOA [the Iran nuclear deal] is the best way to allow everyone to focus on the other worrisome issues… We need to create some carrots alongside the sticks regarding human rights, ballistic missiles, and regional adventurism, and Europe needs to be part of that discussion.”
The former ambassador to the International Atomic Energy Agency stated, “I don’t know why they [Europe] haven’t” been until now, “so I’m not sure exactly what needs to change. The sequencing on extending some of the sunset clauses needs to include a stable JCPOA, quiet conversations with EU3 [England, France and Germany] about what exactly we want to extend and what we’d be willing to trade it for.”
Finally, she emphasized that only after “Iran ratifies the Additional Protocol, making it permanent” should the US and the EU3 “open a discussion about the sunsets,” or the expiration of nuclear restrictions on Iran as the deal winds down.