Iran and Trade with the European Union

Iran trade deal

 

The European Union (EU) invested a considerable amount of resources and political capital into arranging the 2015 Joint Comprehensive Plan of Action (JPCOA) initiated under the Obama Administration. A few years later, the EU also tried hard to prevent former President Trump from withdrawing from the JPCOA. 

 

Currently, with President Biden in office, the EU is once again moving toward positioning itself as the middle man between the Iranian regime and Washington. Given the EU’s continued investment in nuclear and trade policy with Iran, it begs the question, what does the EU stand to gain from the outcome of this arrangement?

 

If a deal similar to the JPCOA were to be reenacted between Washington and Tehran, sanctions would be softened, facilitating trade between Iran and Europe. EU states opposed Trump’s maximum pressure campaign, which placed restrictive sanctions on Iran. However, Trump’s maximum pressure sanctions had about the same impact on Iran-European Union trading as the multilateral sanctions did before the JPCOA was enacted. As far as the EU is concerned, Trump’s sanctions serve as a return to the status quo of restricted trade with Iran. The JPCOA represented an opportunity to change this ‘norm.’ 

 

Moreover, while EU states have access to many trading partners, Iran does not. If sanctions were to be lifted or softened, states in the EU would benefit financially from a more exclusive trading arrangement with Iran. A large part of the impact of sanctions is related to limiting the importation of crude oil from Iran. The JPCOA softened sanctions on Iran, opening up avenues for EU states to gain financially from the treaty through trade and investment opportunities.

 

Foreign policy researchers indicate that other countries, such as Saudi Arabia, stand to gain from sanctions on Iran. See here for more information on foreign policy research. With oil exports from Iran restricted, other countries such as those in the EU turn to Saudi Arabia for crude oil imports. About 46 percent of oil exports from Saudi Arabia go to the EU. A given country’s position toward sanctions with Iran can reflect what they stand to gain or lose.

 

The lifting of sanctions provides the EU with an opportunity for financial investment and trade with Iran. During the height of sanctions with Iran, both before the JPCOA and during Trump’s presidency, EU trade with Iran dropped significantly. Additionally, Iran imports goods from the EU. With sanctions in place, the EU is faced with a negative economic impact due to restrictions on importation.

 

According to experts on international sanctions such as the Foundation for Defense of Democracies, states in the EU stand to gain and seek to open up with Iran. This, despite the negative consequences of less restrictive sanctions policies. The lifting of sanctions and returning to an arrangement similar to the JPCOA trade could empower the Iranian regime and facilitate their nuclear weapons ambitions. 

 

With renewed trade and a growing economy, the theocratic regime in Iran would be bolstered and strengthened. This strengthening of political capital in combination with greater financial resources would provide Tehran with the means to grow its military and nuclear capabilities to dominate the Middle East and further perpetuate terrorist attacks and human rights abuses.