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Caught in the middle All of this concerns the EU greatly. The EU sees the JCPOA as the most effective way to stop Iran obtaining a nuclear weapon, and precipitating a nuclear arms race in the Middle East that will potentially involve Gulf Arab states, Turkey, Egypt as well as Israel. As the EU points out, the IAEA has repeatedly confirmed substantial Iranian compliance with the terms of the deal. The immediate reaction to President Trump’s announcement from the UK, France and Germany was “regret and concern” at the US action and an expression of a continuing commitment to the deal. The UK’s Office of Financial Sanctions Implementation has emphasised that the UK Government continues to fully support expanding Britain’s trade relationship with Iran and encourages UK businesses to take advantage of the commercial opportunities that arise. However, it went on to highlight that the re-imposition of US sanctions may have implications for UK businesses and individuals dealing with Iran. And there is the rub. The President’s announcement will see European companies that have chosen to engage with Iran since Implementation Day exposed to US secondary sanctions after 6th August and 4th November; the first time there has been a significant divergence on Iran policy between the US and EU on what EU companies can do.
illustrates some of the problems that this can cause. Historically the threat of a divergence between the US and EU over Iran has never been a problem. The two have managed to proceed in concert with each other so that US sanctions which unilaterally sought to regulate or restrict trade and investment activities carried out by persons outside the US were mirrored by the EU’s own regulations and restrictions on what EU persons are able to do. But there are earlier precedents for transatlantic fallings out over the extraterritoriality of US sanctions. “The US did not relax its own self-denying sanctions preventing US persons dealing with Iran after Implementation Day; only the secondary sanctions affecting non-US persons. By contrast the EU lifted most of its general restrictions on trade with Iran except for those on controlled good or remaining designated persons.” In the 1980s the US imposed sanctions on companies doing business on a Russian pipeline in Eastern Europe, provoking a diplomatic falling out. And in 1996 the Helms-Burton Act, which, amongst other things, imposed penalties upon non-US persons “trafficking” in Cuban property formerly owned by US persons, provoked a furious response from the EC which launched blocking legislation and a WTO panel investigation alleging that the extraterritorial restriction of trade between the EC and Cuba breached various provisions of the GATT and GATS. The US countered that it was prepared to rely on the rarely used national security exemption in the GATT. The dispute was only withdrawn after high level political compromise. But the prospect of a large scale transatlantic trade dispute over Iran developing at the same time as a US / EU dispute over US aluminium tariffs and extraterritorial Russia sanctions is deeply concerning for the EU. The tough decision for many EU companies – and one that they never had to consider before Implementation Day because the activities were directly sanctioned by the EU in any event – is whether they can risk continuing engagement with Iran without infringing the renewed US secondary sanctions, which are sometimes couched in much less specific terms than the old EU prohibitions. The penalties for breaching US secondary sanctions are not fines or custodial
“The immediate reaction to President Trump’s announcement from the UK, France and Germany was “regret and concern” at the US action and an expression of a continuing commitment to the deal.”
The US did not relax its own self-denying sanctions preventing US persons dealing with Iran after Implementation Day; only the secondary sanctions affecting non-US persons. By contrast the EU lifted most of its general restrictions on trade with Iran except for those on controlled good or remaining designated persons. As a result, European companies that have been able to find means of getting paid (not an easy task when US dollar transactions are still proscribed) have engaged with Iran more enthusiastically – a fact that is no doubt not lost on a President currently jostling with the EU over aluminium tariffs. The unilateral re-imposition of US secondary sanctions will impact these European companies. The recent application of US secondary sanctions against certain Russian companies and oligarchs
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