The Iran Deal – Playing the Long Game

On Friday, July 6th 2018, the signatories of the Iranian nuclear deal (minus the United States) will meet at the ministerial level to decide on their collective response to the American withdrawal from the agreement (JCPOA). Here are the views of Michel Duclos, our Special Advisor, on what this answer should be.

On May 8, Donald Trump announced the American withdrawal from the nuclear agreement with Iran. The Iranians, despite their suggestions in the days preceding the American decision, have chosen to remain in the agreement, at least conditionally. First Mr. Rouhani, then Ayatollah Khomeini, have indicated that Iran would continue to respect its obligations if the other signatories, particularly the Europeans, could ensure that the economic benefits they expect from the implementation of the JCPOA can be maintained. Seen from Tehran, the economic aspect of the deal is undoubtedly important in itself, on top of the domestic political reasons. It is also a matter of the Iranians providing a justification for remaining in the agreement, thereby attempting to isolate the Americans.

Mr. Pompeo's speech, setting out the American conditions for a new agreement with Iran only served to convince the Iranians that the sole purpose of the "maximum pressure" strategy was regime change in Tehran. The Europeans have expressed at the highest level their determination to resist the new American sanctions in order to safeguard the agreement. A few weeks later, the reality does not completely correspond to the initial declarations of intent. One after another, large multinational companies have announced that they are withdrawing from the Iranian market. The measures decided by European leaders – a revision of the "blocking regulations", the introduction of financial vehicles outside American jurisdiction – are having difficulty materializing. A formal letter was sent by the E3 foreign and economic ministers requesting exemptions from Washington from US sanctions for European companies, but with little hope of a positive response. The Iranians are starting to get impatient and have reiterated their threat to get out of the agreement.

“In any event, both Iranians and Europeans would be wrong to focus exclusively on the economic aspect and to lock themselves into the short term. On the contrary, they must play the long game”

Should they feel that their initial stance - the conditional retention of the agreement - is not working, Iran's leaders could indeed shift their position, resulting in the resumption of activities linked to their nuclear program. This would start at a level compatible with the JCPOA before eventually moving outside of the provisions of the agreement. In this scenario, the Europeans will have no choice but to denounce the Iranian stance and resolve to follow the Americans in re-establishing sanctions - thus suffering a second humiliation after the camouflage constituted by the American withdrawal. When could it come to that? An important deadline for Iranians will undoubtedly be the US midterm elections. These take place in November, shortly after the date on which US sanctions come fully into force. A weakening of the Trump administration could lead them to favor strategic patience.

In any event, both Iranians and Europeans would be wrong to focus exclusively on the economic aspect and to lock themselves into the short term. On the contrary, they must play the long game. At this stage, it is mainly the Chinese (and perhaps the Indians and Russians) who can solve the Iranians' main problem of removing their oil. Europe's role is above all to provide political backing. Beyond that, the real battle for Europe is not the protection of Iranian economic interests but the resistance to the extraterritoriality of American laws. Iran will benefit from this, as long as it respects its share of the contract. It's a battle that will take time. In the immediate future, the first challenge is to better manage the perceptions stemming from the spectacular, and mainly negative, announcements from governments (difficulties to implement decisions on the European side, various ultimatums on the Iranian side) and companies (disengagement from the Iranian market).

“It is in this area that Europeans should work with the Americans to help them formulate a real policy of limiting Iranian influence.”

Moreover, the Iranians still have the regional cards up their sleeve: Yemen, Iraq, Syria, etc. They may suffer occasional setbacks - for example due to the Russian-Israeli collusion in Syria - but for the moment they are in a position to absorb such blows and dangerously attack the interests of the Americans and their allies in the region. The focus of the American approach on the nuclear issue actually leaves the field open for Iran at the regional level. The regional players are convinced that the United States will continue its withdrawal from the Middle East. It is in this area that Europeans should work with the Americans to help them formulate a real policy of limiting Iranian influence.

Finally, the American strategy of maximum pressure may one day have a destabilizing effect on the Iranian regime. For the time being however, it has simply strengthened the cohesion of the various branches of the coalition leading the Islamic Republic. Is there not a good chance that a change of administration in Washington will occur long before a change of regime in Tehran?