Europe Has Billions of Reasons to Let Iran Cheat

Europe’s rapidly expanding economic relationship with the Islamic Republic of Iran prompted Sen. Jeanne Shaheen (D-N.H.) to call for a unified trans-Atlantic approach to enforcement of the nuclear deal reached in July.

Yet powerful European business interests mean a robust enforcement of the nuclear agreement between Tehran on the one hand and the P5+1 powers (China, France, Russia, United Kingdom, United States—plus Germany) and the European Union on the other, remain a formidable challenge.

Put simply, the billions of dollars at stake provide a powerful incentive for signatory countries to refrain from reporting violations.

After Europe introduced crippling sanctions in 2011-2012, EU-Iran trade dropped to less than $10 billion per year. It is now expected that bilateral trade could quickly reach $30 billion.

Tehran is to receive more than $100 billion in frozen assets for promising to restrict its illicit nuclear program, as well as a massive infusion of investment and huge jumps in sales of its oil and natural gas.

Shaheen is right to be concerned about Iran’s long history of deception. As reported in The Hill, she wrote to U.S. allies—Germany, Great Britain and France: “[R]esponding to potential Iranian violations will require our continued cooperation, particularly regarding possible small-scale incidents of Iranian non-compliance.” Shaheen’s preemptory effort to solidify enforcement of the Iran deal is laudable. 

Nonetheless, here are some of the compelling economic reasons that Europe might very well turn a blind eye to violations of the Iran deal.

In August, the UK foreign secretary Philip Hammond arrived in Tehran with a business delegation and declared that British businesses have a “huge appetite” for trade with the Islamic Republic. For the UK, one key aim is to restart “oil negotiations,” said Hammond.

For Germany, if past is prologue, sanctions enforcement will be downplayed. In 2010, President Obama sought to persuade Chancellor Angela Merkel to shut down the Hamburg-based European-Iranian Trade Bank (EIH). The then-International Herald Tribune columnist John Vinocur wrote at the time: “I also have been told that similar reluctance, this time involving German hesitation to clamp down on a bank in Hamburg
facilitating suspect European deals with Iran, resulted in a recent phone call, to no immediate avail, from Mr. Obama to Chancellor Angela
Merkel.”

Obama’s Treasury Department designated EIH a sanctioned bank because, “As one of Iran’s few remaining access points to the European financial system, EIH has facilitated a tremendous volume of transactions for Iranian banks previously [blacklisted] for proliferation.”

A bipartisan group of US senators issued a strongly worded letter to Germany’s then-Foreign Minister Guido Westerwelle asking him to shut down EIH’s operation in Germany, and a WikiLeaks dispatch revealed: “Germany won’t sanction German Bank EIH” because “the German business community is very powerful.” Merkel resisted and resisted.

After a nationwide scandal became public with the EIH transferring €1.5 billion in dubious oil payments via the German central bank (the Deutsche Bundesbank) to Iran, Merkel capitulated. The EIH was included in the EU terror list.

Consider: Is the German government now prepared to report small-scale violations of the Iran nuclear deal, when it previously was indifferent to large-scale sanctions evasion?

France’s courting of Iran’s business class mirrors that of the  United Kingdom and Germany. In September, France opened a trade office in Tehran and representatives from over 130 large companies, including energy giant Total and car manufacturer Peugeot, visited Iran. France’s struggling economy surely does not add an incentive for President Francois Hollande’s administration to crackdown on sanctions violations.

The US Congress should consider enhanced penalties for European companies and countries that fail to enforce with vigor the Iran nuclear deal.

Weinthal is a Berlin-based fellow for the Foundation for Defense of Democracies. Follow him on Twitter@BenWeinthal