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Iran nuclear deal

For Europe, the Iran nuclear deal is all about trade.

This article was originally published in The Hill. Read the original article

This is an opinion piece by Professor Sandeep Gopalan, Pro Vice-Chancellor for Academic Innovation and Professor of Law, Deakin University. The author's view and opinion may not imply or reflect Deakin Law School's view. 

The leaders of Europe’s two most powerful countries — France and Germany — visited the White House recently to try to convince President Trump to keep in place the Joint Comprehensive Plan of Action (JCPOA). Before and after their back-to-back trips, President Emmanuel Macron and Chancellor Angela Merkel bolstered their diplomatic efforts with several calls between the European leaders, including British Prime Minister Theresa May. Trump, who has referred to the Iran nuclear deal as “insane," will announce his decision Tuesday whether to terminate the agreement.
In many respects, the advocacy by Macron and Merkel mirrors the desperation of the Iranian regime — threatening, cajoling, pleading — for the United States to remain in the agreement.
This begs the question of why France and Germany are eager to preserve the deal. Are they peaceniks who care about nuclear non-proliferation and desire world peace? No, their support and that of the European Union for the JCPOA is motivated primarily by rational self-interest. It translates into dollars: valuable trade with Iran. The European Union was Iran’s largest trade partner before the imposition of sanctions and clearly has an interest in recovering that position.
French trade with Iran collapsed after sanctions were imposed in 2006. When those sanctions were lifted, France-Iran trade grew 118 percent from January to October 2017, compared to the same time frame the previous year. French oil company Total concluded a deal worth about $4.8 billion to develop the world’s largest gas field in South Pars over 20 years. Airbus entered into a deal to sell 100 airplanes to Iran estimated to be worth $18 billion. French carmakers Renault and Peugeot also have sizable markets in Iran.
Germany once was Iran’s main trade partner. Its trade with Iran was worth $4.5 billion in 1975 and grew to around $6 billion in the late 1970s. After falling to about $2 billion in 2013, Germany’s exports to Iran recovered in 2017 to be worth $3.5 billion. That trade is on an upward trajectory to catch up with historical highs.
The European Union was Iran’s third-largest trade partner — China and the United Arab Emirates are the top two — in 2017. EU exports to Iran grew at an annual rate of 31.5 percent and imports grew 83.9 percent during 2016-17. From 2013 to 2017, the annual growth rate for imports was a staggering 89.7 percent, and growth for exports was 18.7 percent.
Several EU countries have benefited from the restoration of relations with Iran. Trade between Iran and Austria, for example, grew 34 percent last year, compared to the corresponding previous period and there are plans for increasing it further with a major financing agreement by Oberbank. Spain’s trade with Iran was worth €1.67 billion, and the Netherlands had €1.34 billion in 2017. Italy also was a major beneficiary; its trade grew 117 percent year-on-year during 2016-17.
What did the European Union export to Iran? Nuclear reactors, boilers, machinery, instruments, pharmaceutical and chemical products, vehicles, aircraft, spacecraft, plastics and more. Imports from Iran mainly consisted of mineral fuels, chemical products and food. This mixture of goods indicates that the trading relationship has considerable room to grow.
To be sure, countries outside the European Union also have skin in the game. China’s trade with Iran was worth more than $37 billion in 2017 — it exported $18.59 billion worth of goods, a growth of 13 percent year-on-year. China accounted for about 21 percent of Iran’s exports; the United Arab Emirates, 14 percent (worth over $5 billion); Iraq, 14 percent (worth over $5 billion); South Korea, 9.5 percent (worth over $3.4 billion); and India, 6 percent from January to October 2017.
All of this demonstrates that EU advocacy for the Iran deal is not solely out of a concern for regional stability or nuclear non-proliferation. Contrary to their characterizations, Macron and Merkel may not be “honest brokers”; rather, they are partisans campaigning for what is best for France and Germany, respectively.
Denuding EU advocacy of its gloss enables a clear assessment of options. The French are masters at pursuing their commercial interests with little concern for the interests of other states. A previous version of a deal with Iran collapsed in 2003 because of French opposition. Notably, France supplied technology for the Iranian nuclear program — Framatome entered into a contract with the Shah of Iran to build plants and supply fuel in 1974. German foreign policy also is notable for its singular emphasis on economic self-interest. For example, it approved the construction of the Nord Stream II pipeline despite a litany of Russian violations of international law condemned by the European Union.
President Trump has referred to the JCPOA as “an embarrassment to the United States” and  “the worst deal in history.” At a press conference during Macron’s recent visit, Trump stated: “This is a deal with decayed foundations. It’s a bad deal, it’s a bad structure, it’s falling down. It should have never, ever been made.”
His heated rhetoric should not drive President Trump’s decision regarding the nuclear agreement. As France and German have done, he should base his decision on a cold assessment of self-interest, after examining alternatives. The United States once was heavily entangled with Iran’s nuclear program when it suited its self-interest — helping to ignite it in 1957 with the Atoms for Peace program and supplying nuclear reactors and enriched uranium. Why should America’s motivation in May 2018 be any different?
Unfortunately, the clearest way for the United States to advance its self-interest — that is, a change of regime in Iran — is not viable. Absent that, President Trump may be correct in pulling out of the deal and once again imposing sanctions as the second-best option.
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