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Europe and the Future of Iran Policy: Dealing with a Dual Crisis Ali Fathollah-Nejad1

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Europe and the Future of Iran Policy: Dealing with a Dual Crisis Ali Fathollah-Nejad1 POLICY BRIEFING / OctoBER 2018 Europe and the Future of Iran Policy: Dealing with a Dual Crisis Ali Fathollah-Nejad1 ince signing the Joint Comprehen- sive Plan of Action (JCPOA), the EU/E3—the EU, Germany, France, Sand the UK—have pursued rapprochement with Iran. Since the U.S. withdrawal, the future of the JCPOA has been in jeopardy. This policy briefing provides a critical review of Europe’s policy of rapprochement with Iran. It contends that EU policy on Iran must address two crises: first, a U.S. policy toward Iran that contrasts with the one pur- sued by Europe, with the transatlantic pow- ers working at cross-purposes and, second, an Islamic Republic that faces an acute crisis at home. This briefing suggests Europe should cooperate with Washington over Iran policy, acting as a corrective. Vis-a-vis Tehran, Europe must pursue a dual strategy of continued cooperation while using its leverage to encourage Iranian course corrections. Such an Iran policy would couple pragmatism with idealism as enshrined in the EU Global Strategy. KEY RECOMMENDATIONS • Keep the JCPOA alive for two reasons: (1) • Avoid pro-regime favoritism: The EU containing the Iran nuclear program would needs to take a clear stance in support of the help prevent a nuclear arms race in the Mid- Iranian people’s democratic rights. Leaving dle East; (2) maintaining the JCPOA ensures the scene to Washington would play into the that the EU will retain leverage over Iran. hands of the regime’s repressive apparatuses. The EU must signal to Iran’s elite that state • Engage Washington: A transatlantic Iran pol- repression will negatively impact its economic icy should not be buried because concerns over and political engagement. Iranian policy are likely to outlive the Trump Administration. Yet the EU should simultane- • Initiate an overdue paradigm shift toward ously pursue the project of strategic autonomy. harmonizing foreign and development policies: The authoritarian stability and • Use the EU’s leverage with Iran: The EU neoliberal economic policies of the past should not shy away from introducing have failed to produce stability in Europe’s conditions for cooperation. Taking a steadfast neighborhood, including Iran. The EU must approach will present an important driver for now prepare the conceptual grounds for a Tehran to start changing its behavior. paradigm shift in its foreign policy. TheB rookings Institution is a private nonprofit organization. Its mission is to conduct high-quality, independent research and, based Copyright © 2018 Brookings Institution on that research, to provide innovative, practical recommendations for policymakers and the public. The conclusions and recommenda- BROOKINGS INSTITUTION tions of any Brookings publication are solely those of its author(s), 1775 Massachusetts Avenue, and do not necessarily reflect the views of the Institution, its man- N.W. Washington, D.C. 20036 U.S.A. agement, or its other scholars. www.brookings.edu Brookings recognizes that the value it provides to any supporter is BROOKINGS DOHA CENTER in its absolute commitment to quality, independence and impact. Saha 43, Building 63, West Bay, Doha, Qatar Activities su ported by its donors reflect this commitment and the www.brookings.edu/doha analysis and recommendations are not determined by any donation. INTRODUCTION U.S. President Donald Trump’s unilateral with- accompanied by regime change rhetoric and a drawal from the JCPOA on May 8, 2018, fol- public relations campaign questioning the Is- lowed by Secretary of State Mike Pompeo’s May lamic Republic’s legitimacy.3 Yet the adminis- 21 address on a new Iran policy, has called into tration insists that it only seeks to change the question the viability of that multilateral agree- regime’s behavior.4 At the core of Washington’s ment. This development poses an immense maximum pressure strategy toward Tehran challenge to Europe’s policy of cooperation and stands the re-imposition of U.S. extraterrito- rapprochement with Iran.2 Pompeo has made rial sanctions in two rounds; in early August twelve maximalist demands, calling on Iran to and more importantly in early November 2018 end its nuclear and ballistic missile programs targeting Iran’s oil exports (see Figure 1) and its and to cease regional meddling. This has been central bank. Figure I: Iranian Crude Oil Exports Africa Asia & Pacific Europe 2500 2000 1500 (1,000 B/D) 1000 500 0 2011 2012 2013 2014 2015 2016 2017 Year Source: Organization of Petroleum Exporting Countries, “OPEC Annual Statistics Bulletin,” accessed July 17, 2018, https://www.opec.org/opec_web/static_files_project/media/downloads/publications/ ASB2017_13062017.pdf; Statista, “Iran’s Oil Exports by Region 2008–2017,” accessed July 17, 2018, https://www.statista.com/statistics/264170/oil-exports-of-iran-by-region-2008/. 1 Policy Brief • October 2018 The economic impact of the U.S. sanctions started Tehran’s authoritarianism.10 While the chances unfolding even before their re-imposition. Many of Iran abiding by Pompeo’s demands regarding European companies and financial institutions have its regional policies is close to nil,11 the unprec- been forced to halt their Iran activities while the Ira- edented crisis at home and dwindling resources nian national currency has spiraled downwards. might pave the way for Iranian compromises. With U.S. sanctions already taking a heavy toll on Meanwhile, Europe has pledged its intention to save Iran’s crisis-ridden economy, there is still uncertainty the JCPOA and has expressed opposition to the new about the end game of the Trump administration’s U.S. policy on Iran. However, it cannot ignore that maximum pressure strategy; is it seeking the re- Washington’s maximum pressure policy challenges gime’s collapse or forcing it to change its behavior its own Iran policy of cooperation and rapproche- through an aggressive containment policy to limit ment. Against this backdrop, the EU’s Iran policy its offensive capabilities, ultimately bringing it closer must address these two fundamental challenges: the to bowing to U.S. demands? President Trump’s July new direction of U.S. policy, as well as Iran’s unprec- 2018 offer to strike a new deal with Tehran without edented domestic crisis. preconditions suggests that the latter might be pur- sued.5 But this willingness stands in contrast to his EUROPE AND IRAN: secretary of state’s twelve demands, making it hard THE EU’S INTERESTS, for the Iranian leadership to enter into public talks STRENGTHS, AND LIMITATIONS while saving face. However, despite Iran’s Supreme Leader Ali Khamenei’s rejection of talks,6 they can- The EU’s interests pertaining to Iran are (1) to main- not be excluded given the heavy and comprehensive tain stability in the Persian Gulf region, which con- impact of U.S. sanctions. Indeed, Tehran is left with tinues to be vitally important for global oil supplies little benefit of what remains from the JCPOA, at a and prices; (2) to resolve the conflicts in the Middle time of acute domestic crisis.7 Oman and Switzer- East, not least in order to prevent further refugee land might provide back channels for such talks.8 movements toward Europe in the wake of instability and failing states; (3) to diversify its energy supplies Washington’s new Iran policy might indeed be by increasing Iranian imports and reducing Europe’s intended to provoke Tehran to leave the JCPOA significant energy dependence on Russia; and (4) to and to force it into accepting a new deal. How- boost exports of its industrial goods by expanding ever, Iran abandoning the JCPOA might only be economic relations with Iran at a time of weak Eu- the case under special circumstances, as such a ropean growth rates over the past decade. material breach of the accord would abrogate the U.N. Security Council resolution that suspended In its dealings with the Gulf region, the EU international sanctions.9 U.N. sanctions would Global Strategy, published a year after the signing be snapped back, while Tehran would lose the of the JCPOA, advocates a balanced engagement: support of the remaining partners to the agree- ment (EU/E3, Russia, and China). The EU will continue to cooperate with the Gulf Cooperation Council (GCC) and individual The Islamic Republic of Iran has entered the most Gulf countries. Building on the Iran nuclear deal acute crisis in its history. The 2017/2018 revolt and its implementation, it will also gradually en- and ongoing protests have resulted from interre- gage Iran on areas such as trade, research, envi- lated socioeconomic, political, and environmen- ronment, energy, anti-trafficking, migration and tal challenges, reaching an unprecedented climax. societal exchanges. It will deepen dialogue with The new U.S. strategy is likely to deepen Iran’s Iran and GCC countries on regional conflicts, internal crisis, at the same time helping to fuel human rights and counter-terrorism, seeking to 2 Europe and the Future of Iran Policy: Dealing with a Dual Crisis prevent contagion of existing crises and foster IRAN CAN HARDLY AFFORD the space for cooperation and diplomacy.12 TO LOSE EUROPE However, these policy aims, for the most part, Although Washington’s new tough line on Iran do not reflect the objectives espoused publicly by has emboldened hardline circles in Iran opposed many European policymakers, who believe that to the JCPOA, there is a willingness at the top engaging in trade and rapprochement with Iran of the IRI to keep the deal alive. On May 23, should contribute to facilitating change there. Iran’s Supreme Leader demanded from Europe six concrete guarantees. They include increas- The strengths of Europe’s relationship with Iran ing EU oil imports from Iran to compensate lie in the central role it has played in the mod- for re-imposed U.S.
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