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August 8, 2017

It’s Up to Europe to Save the Iran Deal

This is not a drill, folks. Following a fight inside the White House over recertifying Iran’s compliance with the Joint Comprehensive Plan of Action (JCPOA) — the nuclear accord between Iran and six major world powers, including the United States — President Donald Trump has signaled his intent to refuse such certification when the issue comes up again in October. Dissatisfied with the State Department’s adherence to the facts at hand, the president has set up a team at the White House to give him options on how to leave the agreement. Make no mistake, though: Decertification would risk undermining the nuclear deal, reimposing U.S. sanctions lifted under the agreement, and resuscitating the risk of war.

Trump’s abandonment of the JCPOA would be a major blow, but it need not be a fatal one. The agreement, after all, is not a bilateral deal between the United States and Iran — European countries (as well as Russia and China) also struck the deal and now have the opportunity to deter Trump from sabotaging it. If it has the political courage to chart a course independent of Trump, Europe can protect both American and European interests by preserving the deal.

To start, Europe should preemptively and publicly communicate that it will not follow Trump’s lead if the United States leaves the deal, absent serious indication of Iran’s noncompliance with its nuclear-related obligations. Following the breakdown of nuclear talks in 2005, Brussels agreed to cooperate in imposing sanctions on Tehran under the belief that the United States and the European Union had a shared interest in halting the Islamic Republic’s nuclear progress. If the Trump administration indicates that it intends to abandon the JCPOA, European leaders would have reason to question Washington’s commitment to their shared interests. As a result, Europe should make clear that cooperation on any future sanctions regime will be at serious risk, including in areas where the United States and Europe ostensibly face shared threats like Russia.

Europe can also act preemptively to mitigate the consequences of any potential reimposition of U.S. sanctions by revitalizing an EU regulation forbidding European compliance with American extraterritorial sanctions. This regulation — which has fallen into relative disuse — prohibits European companies from acting in compliance with the Iran Sanctions Act, which, at the time, threatened sanctions on foreign energy giants investing in Iran’s energy sector. The EU should amend this regulation to add all U.S. sanctions lifted under the JCPOA. In doing so, Europe will send a clear message to the Trump administration that if it intends to abandon American and European interests as outlined in the agreement, it will do so alone.

The practical effect of this move will be twofold. First, it will provide European countries with confidence that their home governments will protect them from the extraterritorial application of U.S. sanctions. Second, it will deter the United States from effectively applying its sanctions to European companies. Europe would do well to note that the United States failed to enforce the Iran Sanctions Act during the entirety of its first decade in existence as a result of this regulation.

Europe will also need to think in the long term. The potency of American sanctions stems from the power of the U.S. dollar: Most international trade is conducted in dollars, and financial transfers related to such trade need to be processed through the United States. Efforts to create offshore dollar-clearing facilities to avoid the United States have been tepidly pursued thus far, but Brussels can take a big leap forward by announcing its intent to encourage and promote the development of such a facility.

Together, these moves can serve as potent warning shots to those who believe that Trump — thanks to the passivity of Europe — can revive America’s sanctions leverage. American and European interests should not be held hostage by a rabid pack of ideologues in the White House. Sanction-happy U.S. officials will not stop pushing for ever increasing economic warfare until they see a credible threat to America’s unique role in the global financial system.

Finally, Europe can encourage its international partners to enact measures ensuring that any reimposed U.S. sanctions have a limited effect on the Iran deal. It has done so before: When the United States first sought to aggressively impose extraterritorial sanctions on Iran in the late 1990s, Europe was not alone in resisting those efforts. Japan, South Korea, Canada, Mexico, and other countries either imposed or threatened to impose similar blocking statutes that prohibited home companies from complying with U.S. sanctions. Europe can once again encourage its partners to take preemptive action aimed at warning off the Trump administration from derailing the nuclear deal.

Trump is in clear breach of America’s JCPOA commitments, including its pledge to prevent interference with Iran’s realization of the full benefit from the original sanctions lifting. He has also openly stated his determination to blow up the Iran deal. Friends don’t let friends drive drunk, and on the international level, enabling this belligerence need not be the prerequisite for maintaining strong transatlantic relations. Before the nuclear deal was successfully negotiated in July 2015, it was conventional wisdom in Washington that Iranian leaders only respond to pressure. That myth was shattered two years ago, but it looks increasingly true today about the Trump administration. Europe would be wise to proceed accordingly.

This piece originally appeared in Foreign Policy.

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