On Wednesday, a day after Donald Trump announced that he is withdrawing the United States from an international nuclear agreement with Iran, Emmanuel Macron, the President of France, called his counterpart, Hassan Rouhani, in Tehran, and “reiterated France’s desire to continue implementing all aspects of the . . . agreement.” France’s foreign minister, Jean-Yves Le Drian, told a French radio network, “The deal is not dead. There is an American withdrawal from the deal, but the deal is still there.” In other European capitals, senior politicians and diplomats were uttering similar remarks. For the first time in living memory, America’s European allies have collectively broken with Washington on a major security issue. Or so it seems.
In the seven decades since Hitler was defeated and the transatlantic alliance was formally constituted, there have been other serious breaches. In 1956, the Eisenhower Administration balked at supporting the Anglo-French military takeover of the Suez Canal. In 2003, France and Germany refused to join the U.S.-led “coalition of the willing” in the invasion of Iraq. But never had all of Europe stood united against a U.S. Administration and accused it of being an international scofflaw—until Trump.
The charge was effectively levelled in a joint statement issued on Tuesday by Macron, Angela Merkel, the Chancellor of Germany, and Theresa May, the Prime Minister of the United Kingdom. The statement noted that the United Nations Security Council had unanimously approved the Iran deal, known formally as the Joint Comprehensive Plan of Action (or J.C.P.O.A.), in 2015, and said that it “remains the binding international legal framework for the resolution of the dispute about the Iranian nuclear programme.” Translated from diplomatic speak, this amounted to an accusation that the United States, and not Iran, was the country violating international law.
The joint statement went on: “Our governments remain committed to ensuring the agreement is upheld, and will work with all the remaining parties to the deal to ensure this remains the case including through ensuring the continuing economic benefits to the Iranian people that are linked to the agreement.” This was a pledge to try to save the nuclear deal, despite Trump’s efforts to destroy it. The statement fell short of declaring Trump a know-nothing vandal intent on wrecking the international system. It didn’t need to: throughout most of Europe, that is taken as a given.
But how far are European leaders willing to go in standing up to Trump? And how far will they be able to go? To persuade Iran that it would be best served by continuing to abide by the J.C.P.O.A., the five non-American parties to the deal—France, Germany, the United Kingdom, China, and Russia—will have to provide Tehran with meaningful financial support as the United States restores its draconian economic sanctions. If the Europeans go down this route, they will almost certainly be drawn into a deeper conflict with the Trump Administration, with which they are already at odds over tariffs. And some big European businesses could end up paying a large price.
The 2015 agreement freed up American and European firms to do business with Iran, as the harsh sanctions that had been imposed previously were relaxed. In the ensuing years, Iran’s oil exports doubled, and it regained limited access to the international banking system. Now, though, the Trump Administration is calling for the restoration of “maximum sanctions” and threatening to punish big multinational companies that don’t cut their ties to Iran, regardless of where they are based. On Tuesday, the new U.S. Ambassador to Germany, Richard Grenell, a Trump loyalist, said, on Twitter, “German companies doing business in Iran should wind down operations immediately.”
Grenell’s statement prompted outrage in Germany, but the implicit threat it contained wasn’t an empty one. As it has demonstrated in the past, the U.S. government has the legal power to impose heavy fines on any firm that does business in the United States and violates U.S. sanctions. In 2014, the Obama Administration fined BNP Paribas, a French bank, 9.4 billion dollars for violating sanctions on Cuba, Iran, and Sudan. Practically every European multinational that has done business with Iran in the past few years, such as the plane manufacturer Airbus and the oil company Total, has operations or suppliers in the United States.
If these firms don’t cut their ties with Tehran, the Trump Administration could fine them billions of dollars. It could also fine any big European bank that helped facilitate Iran’s exports, a key component of its economy. In recent months, European central banks have discussed “whether to establish a clearing system to allow Iranian oil trades in euros” rather than dollars, Bloomberg Europe reported on Wednesday. But this idea didn’t go very far, the report said, “in part because such a mechanism wouldn’t protect European companies with business interests in the U.S. from being penalized.”
Even if an oil deal with the Iranian government was denominated in euros, banks could well face sanctions from Washington, David Mortlock, an economic expert who worked on the National Security Council during the Obama Administration, told Bloomberg. And without banks willing to finance deals, commerce won’t get very far. “The initial impact of this will be to essentially freeze trade with Iran,” an oil-industry executive told the Financial Times. “We’re all backed by European banks who are not going to provide any financing for trades with Iran, even if we wanted to.”
Given these practical difficulties, there is a good deal of skepticism in business and diplomatic circles about the resolve of the European leaders who have spoken out against Trump’s decision. On Wednesday, reports emerged that they are preparing to ask the Trump Administration nicely to grant European firms exemptions from the U.S. sanctions. If, as seems likely, the White House and the Treasury Department turn these requests down, what will Europe’s leaders do?
Conceivably, their governments could agree to counteract the U.S. sanctions by, for example, indemnifying European firms against U.S. fines and using government-run financial institutions, such as the European Investment Bank, to extend credit to Iran. It’s not clear that such a strategy would work, however, and the White House could well react to it by escalating its retaliatory measures against European firms.
To sum it up, Macron, Merkel, and their colleagues are faced with an unenviable dilemma: In the interests of avoiding a nuclear-arms race and preserving some sort of order in the Middle East, should they stand up to the wrecker in the White House at an economic cost to their own countries, and at the risk of creating even deeper fissures in the transatlantic alliance? In the coming weeks, we will see how the Europeans deal with this challenge.
