Leading European Powers further throw Iran Nuclear Deal into Uncertainty

On July 14, 2015 led by the U.S., the Joint Comprehensive Plan of Action (JCPOA), otherwise known as the Iran nuclear deal went into effect. This was:

“A preliminary framework agreement reached between the Islamic Republic of Iran and a group of world powers: the P5+1 (the permanent members of the United Nations Security Council – the United States, the United Kingdom, Russia, France, and China – plus Germany) and the European Union.”

On May 8, 2018 the U.S. announced it was leaving the framework agreement. When the U.S. withdrew, European leaders supported the view that the United Nations Security Council resolution “endorsing the nuclear deal remained the ‘binding international legal framework for the resolution of the dispute.’”

The U.S. has challenged that it had no international or domestic, legal binding mechanisms within the agreement. From May 2018 to today the fractured, nuclear arms control agreement “has heightened tensions and left the remaining signatories scrambling to keep the deal alive.”

The Europeans have sought financial mechanisms known as the Instrument In Support of Trade Exchanges (INSTEX). This financial circumvention of American sanctions against Iran was announced in early 2019 to open “a new channel for non-dollar trade that would allow EU entities of doing business with Iran.” This was led by Britain, France and Germany (BFG), and put in place to enshrine they favored the Iran nuclear deal, and rebuke President Trump’s decision to exit JCPOA. European allies have consistently disapproved of the Trump administration’s hostility towards Iran.

INSTEX has been unstable from the beginning, and The Society for Worldwide Interbank Financial Telecommunication (SWIFT), the main international, financial payment system has removed Iranian banks and financial institutions from its networks over insistence from Washington. Belgian based-SWIFT has isolated Iran from international transactions, and “proven how high the extraterritorial political and economic influence of the US. still is.”

Now BFG leaders have drawn a strong response from Iranian officials after “attacks on two Saudi oil facilities” in early September were blamed on Iran for facilitating and leading the bombings. At a September UN meeting between the heads of the BFG governments – a joint statement condemning the attack – and hinting at leaving the JCPOA were issued. This statement is a reversal of BFG, and overall European policies that have been seeking to keep the framework in place.

The attack on the Saudi’s Abqaiq-Khurais oil processing facility has contributed to further Middle Eastern instability, and drawn the geopolitical risk premium higher for oil and natural gas exploration and production (E&P) development. Saudi Aramco is back to producing close to pre-attack levels of 9.9 million barrel per day (mb/d) of oil, but the company is still trying to restore damaged spare capacity. Restored capacity is important, because it coincided with Saudi Aramco announcing it would pay a $75 billion dividend on its upcoming IPO.

This combustible Middle Eastern conflict between Saudi Arabia and Iran is a main reason Europe – led by BFG – is turning towards resuming sanctions and acquiescing to Washington’s demands of tougher sanctions and actions towards the Iranian government. “Tactical disagreements” over Iran between London, Paris, and Berlin have now been pushed aside since the attacks put the possibility of increased escalations in the Middle East that is the traditional European and NATO sphere of influence.

European security and financial implications from the unprovoked Saudi bombing in BFG’s view, turns Europe towards seeing Iran as a threat, instead of a stable, economic and security partner. The European triumvirate said they call on:

“Iran to accept negotiation on a long-term framework for its nuclear programme as well as on issues related to regional security, including its missiles programme and other means of delivery.”

This significant shift in policy echoes U.S. sentiments that would renegotiate the 2015 Iran nuclear deal, address Iran’s ballistic missile program, and reach an understanding on Iran’s ascendant role in the region. Tehran is now isolated from understanding European capitals, and means INSTEX will no longer assist in financially circumventing U.S. sanctions, or buying Iranian oil. European purchases of Iranian crude were a main source of hard currency for the Iranian government and its affected citizenry.

Iran has additional consternation knowing Europe has bought into the U.S.’ “maximum pressure” campaign against their regime. Iran could be pressured into talks with the U.S. administration, or face more separation from their European counterparts.

Iranian leaders however, have balked at sanctions leading to direct negotiations, and are currently breaking the rules of the deal by “stockpiling excessive enriched uranium.” Additional tensions will arise if Iran enriches weapons-grade levels of uranium, launches other terrorist attacks on Arab nations, U.S. personnel or affiliated allies; and continues halting oil tankers in the Strait of Hormuz.

Iran could be banking on a new U.S. President after the 2020 Presidential elections. One who is more sympathetic to the Iranian security concerns in the Middle East, but Iran may also want to resume face-to-face diplomatic relations after the Trump administration didn’t retaliate over Iran shooting down a U.S. drone. Interrupted, Middle Eastern oil supplies to the U.S. are no longer as great a concern. U.S. fracking of oil and natural gas supplies can now resupply domestic and global markets before an uptick in prices can cause economic hardship.

What Europe is doing by joining American hardliners who support tougher Iranian sanctions is signaling a move back to the U.S. security umbrella provided by NATO. If the Europeans and Americans work through the UN Security Council, then “so-called snap-back sanctions” can be put back in place over Iranian recalcitrance at the American and possible European withdrawal of JCPOA.

Europe may face the same scorn the American administration did when it withdrew from Iran, and the world community over the nuclear deal. BFG now want the unaddressed flaws of the first Iran nuclear deal to be addressed, and the geopolitical moves the Iranians make could determine the outcome of the Middle East for decades ahead.

Todd Royal
Todd Royal
Todd Royal, MPP, is a geopolitical energy consultant and author based in Los Angeles, California. Todd has written for National Interest, OilPrice.com, EurasiaReview.com and had his works picked up Yahoo Finance, USA Today and Business Insider. His upcoming book, "Energy Made Easy," will be released this summer. Todd can be reached on Twitter @TCR_Consulting