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Commentary | 23 April 2018

Saving the JCPOA: the EU has to work with Russia and China

Image of Adlan Margoev

Adlan Margoev |Director of Russia and Nuclear Nonproliferation Program, PIR Center

EU Europe Iran JCPOA Nuclear Arms Control Russia Global Security

With only a few weeks before the May 12 deadline for US sanctions against Iran’s nuclear program is set to be waived, there is little doubt Washington will eventually walk out of the deal. Since the beginning of his election campaign President Trump consistently criticized the Iran deal, known as the Joint Comprehensive Plan of Action (JCPOA). During his presidency he has gradually undermined the agreement. His new cabinet members – National Security Advisor John Bolton and the nominee for the Secretary of State Mike Pompeo – unlike their predecessors, seem inclined to support the President’s effort to leave the JCPOA.

The Europeans, in particular the British, French and Germans, often referred to as the E3, have found themselves between a rock and a hard place. On the one hand they want to save the JCPOA; on the other, they don’t want to undermine transatlantic solidarity. The E3 were right to try negotiating with the current US administration to keep it in the deal. Yet it is high time to realize that demands from Washington are impossible to meet without violating the JCPOA, which was based on separation of nuclear issues from other concerns. The US withdrawal is imminent and Europe has to decide what to do next.

Considering the fragile domestic support for the JCPOA in Iran, it is likely that the country will walk out of the deal once its leadership decides that the agreement does not provide promised economic benefits. Some Iranian parliamentarians are even discussing the merits of Iran leaving the Non-Proliferation Treaty, an unlikely yet disturbing scenario.

The only way to prevent this from happening is to try to keep the core bargain of the deal without US participation. This will require close cooperation between all remaining parties to the deal – the EU, the UK, France, Germany, Russia and China.

 

The EU should coordinate with Russia and China

Saving the JCPOA is in Europe’s best interests. The collapse of the deal will undermine EU credibility. Failure of the JCPOA will also be a huge blow to the nuclear nonproliferation regime. Even more concerning, the restart of a full scale Iranian nuclear program could result in a nuclear technology race in the Middle East, escalation of tensions around Iran, or even military strikes against Tehran by the United States, Israel or other regional players. In a sense, it is up to the EU to prevent a war against Iran.

Moscow is no less concerned about the unravelling of the JCPOA. Russia has invested much time and effort in the negotiation of the Iran deal, which it sees as a success story and a good model for solving international crisis. If the JCPOA collapses, there will be a real risk of increased tensions or even military action against Iran, a partner of Russia, as well as new threats to other partners and broader interests of Moscow in the Middle East, and destabilization in the regions bordering Russia: the Caucasus, Caspian Sea and Central Asia. Moscow is also pursuing peaceful nuclear cooperation with Tehran, including work on two reactors for the Bushehr nuclear power plant. If Iran severs ties with the IAEA to or below the pre-JCPOA levels, it might complicate this cooperation. In case of a conflict, Bushehr might become a target. All in all, Russian position favouring the diplomatic solution to the Iranian nuclear issue has been consistent and predates current international setting.

With the May 12th crisis looming large, the EU seems to be preparing a contingency plan to save the JCPOA. Nonetheless, it is of utmost importance to absorb the pain and get ready for a full-fledged trade war with the United States instead of pursuing half-measures, as well as to coordinate its efforts with Russia, China, and to certain extent with major players outside the JCPOA such as India and Turkey.

This will not be easy: confronting the United States poses serious risks to the European economy. The US secondary sanctions may well hurt European banks and companies. The $9 billion fine which BNP Paribas Bank was subjected to less than four years ago is still fresh in European memories. This arsenal of economic warfare appears more threatening against the background of the Trump administration’s protectionist policies and disagreements with the Europeans over their trade relations.

Cooperating with the Russian Federation to counter US actions may seem implausible amid the recent deterioration of relations with Moscow. Around 150 Russian diplomats were expelled over Russia’s alleged poisoning of Sergei Skripal and his daughter. 18 EU member states joined London and Washington in this demonstration. Additionally, an alleged chemical weapons attack by the Syrian government, an ally of Russia and Iran, was followed on April 14th by a strike against Syria by the United States, the United Kingdom, and France.

However, without full-scale EU investment in saving the deal, Iran will cease its participation in the JCPOA and downgrade the unprecedented level of transparency of its nuclear program. The EU should demonstrate that it is ready to uphold its side of the bargain, including by confronting the United States if necessary.

The EU will not be able to save the deal on its own. Being a multilateral agreement, the JCPOA will only survive with the full cooperation from all of its participants, including Moscow and Beijing. Both Russia and China are permanent members of the UN Security Council and major trading partners of Iran. Devising strategies to preserve the Iran deal without them would make little sense. Some in Europe might believe that siding with Russia against the US for whatever reason will threaten transatlantic relations and Moscow will be able to exploit the rift. However, the EU should make key decision based not on the Russian position on the issue but on the thorough analysis of European and global interests. As in this case the position of the EU coincides with the Russian one, it would be wise to work together to achieve a common goal. In 2014, during the Ukraine crisis, Russia continued the negotiations on the JCPOA despite a sharp crisis with the West, which was crucial for the success of the negotiations. Now, it is the turn of the European Union to engage Russia and other states to preserve the achievement.

 

A Joint plan

The JCPOA does not have any specific provisions to manage a walkout of a party to the agreement. If the United States leaves the JCPOA, the remaining participants could decide to continue to implement the deal. However, US non-compliance will have to be addressed somehow in order to preserve the balance of the deal.

All remaining participants of the JCPOA should condemn any violation of the deal as a breach of international obligations and the spirit of Security Council Resolution 2231. US failure to waive nuclear-related sanctions against Iran and their re-imposition should be called a violation and treated as such irrespective of whether the sanctions will be enforced immediately or, as US experts have suggested, the Treasury will postpone their implementation to exert additional pressure on Europeans and Iran. All the members of the JCPOA should state they will do everything possible to implement the letter but more importantly the spirit of the agreement.

According to numerous statements, the EU is considering passing a “blocking regulation” that would shield its companies from US secondary sanctions and permit them to do business with Iran. Brussels resorted to such measures in the 1990s to address US sanctions against Cuba, and there is no doubt that such measures would be essential to keeping Tehran in the JCPOA. According to a 2017 survey of senior managers at multinational companies by the International Crisis Group, such a move would “positively affect the decision to invest in Iran” for more than half of the surveyed companies.

China and Russia should be fully briefed on the EU decision so that they can come up with similar regulations. In case the EU decides to make a complaint at the World Trade Organization (WTO) against the US secondary sanctions as it did in 1996, Russia and China should join the case. Since Washington would most likely invoke national security exception of GATT Article XXI, a WTO complaint would primarily be symbolic. But it will be an important sign nevertheless, showing that major world powers deem US sanctions illegal.

With the snap-back of all US nuclear-related sanctions, trade with Iran in dollars, already barely possible, will be blocked completely. As the possessor of the second most commonly held reserve currency, the EU should develop a mechanism for payments based on euros to process transactions with Tehran. Russia and China should be fully briefed on the new mechanism to harmonize it with their national financial systems. Other major trading partners of Iran like India and Turkey should get access to the mechanism as well.

One of the gravest threats to the JCPOA lies in the dispute resolution mechanism of the deal, enshrined in Resolution 2231. According to the resolution, any party unsatisfied with the implementation of the deal can (after following through the procedural route) raise the issue at the Security Council. In that case the process of snap-back of the previous UN nuclear-related sanctions against Iran starts, and can only be stopped by passing a resolution to keep the status quo.[1] As a permanent member of the Security Council, the US can block the resolution and thus have six sanction resolutions imposed on Iran. The EU, and especially France and Britain, who are permanent members of the Security Council, should work together with Russia and China to come up with legal solutions to block the US assault on the JCPOA. One possible line of action would be questioning the ‘significant non-performance of commitments under the JCPOA’ by Iran that US would have to invoke to trigger the snap-back and therefore treat Security Council Resolution 2231 as continuing in force. Since Moscow was one of the co-authors of the snap-back mechanism, Russian lawyers should be engaged in discussion as early as possible. Maintaining a unified opposition to actions of Washington in the Council will therefore be of outmost importance. Currently three non-permanent members of the Security Council are EU members, and one is a CSTO member; Poland is presiding the Council in May and Russia – in June.

 

Conclusion

In case Washington walks out of the JCPOA, the position of Brussels will be the key to save the deal from falling apart. There seems to be no consensus in Iran over the reaction to the US withdrawal. Joint efforts of the EU, China and Russia to fully implement the deal and counter US actions could tip the balance in Tehran in favor of staying in the JCPOA. However, absent such an effort, the deal will collapse almost immediately.

The JCPOA is widely seen as a success of multilateral diplomacy. If the EU, Russia and China fail to work together to save the Iran nuclear deal, it is hard to see any international security issue the great powers will be able to cooperate on in the future.

 

[1] UN SC Resolution 2231 (2015), par. 11-12.

 

The opinions articulated above also do not necessarily reflect the position of the European Leadership Network or any of its members. The ELN’s aim is to encourage debates that will help develop Europe’s capacity to address pressing foreign, defence, and security challenges.