Time Running Out to Save Iran Deal as Rouhani Heads to Alps

July 2, 2018, by Jonathan Tirone

(Bloomberg)

Iranian President Hassan Rouhani goes to Switzerland and Austria this week with the landmark nuclear accord negotiated in the two Alpine countries hanging in the balance.

The state visits to Bern on Tuesday and Vienna on Wednesday are likely to be Rouhani’s last before President Donald Trump begins reimposing sanctions on the Islamic Republic Aug. 6. Iran has pledged to resume its nuclear activities, and follow the U.S. out of the deal, unless France, Germany and the U.K. come up with guarantees to ensure investment and trade continue. Austria has just assumed the rotating European Union presidency.

“There’s a great deal at stake — trade wars, reputation and European security,” said Paul Ingram, executive director of the British American Security Information Council, which promotes global nuclear disarmament. “Rouhani will need to press the Europeans for particular commitments beyond the warm words, and communicate his own limited domestic ability to stick with the JCPOA should the Europeans cave under U.S. pressure.”

The Joint Comprehensive Plan of Action, the July 2015 accord that capped Iran’s most sensitive nuclear work in return for the lifting of many sanctions, was plunged into crisis by Trump’s May 8 decision to exit even as international inspectors continued to verify Rouhani’s government was living up to its side of the bargain. The U.S. accuses Iran of violating the accord’s spirit through destabilizing activities the Middle East.

Rouhani’s trip will lay the groundwork for a ministerial meeting of the six remaining JCPOA parties this month in the Austrian capital, where officials from China and Russia are expected to join their European counterparts. That encounter is expected to put flesh on an economic package crafted to buffer U.S. sanctions, according to Ellie Geranmayeh, a senior fellow at the European Council on Foreign Relations.

“The difficulty of striking a deal is bringing clearly to the surface weaknesses of independent European trade policy,” Geranmayeh said. “The Iranians know there are no quick fixes.”

For Iran’s government, already trying to contain mounting public anger over its management of a currency crisis, the stakes are high. Last week, Rouhani sought to prepare his people for tougher times ahead, saying they could survive any difficulties.

“We will not surrender before America, we will protect our historic dignity,” Rouhani said in a televised speech. “We have to show the world that we will tolerate tough times, we will tolerate difficulties but we will not trade in our independence, our freedom or our faith.”

On Monday, he said Iran expects European nations to come up with a package to save the deal in the “coming days.”

A large bulk of Iran’s oil revenues and banking ties will be at stake if neither can be protected by the EU. Rouhani, who’s facing intense pressure from hardline conservatives at home who accuse him of being naïve for ever trusting the U.S., would be left with little incentive to remain in the deal and in compliance with its terms and conditions.

Rouhani will sign agreements in Vienna that give Iran access to transport and water management, according to the Austrian Press Agency. His Austrian counterpart, Alexander Van der Bellen, told APA that “the EU will continue to work for the continuation of the nuclear agreement as long as Iran also keeps its commitments.”

Proposals to allow European finance to bypass American sanctions have been met with skepticism by EU states, which are also trying to negotiate trade disputes with the Trump administration that could threaten U.S. exports worth more than $435 billion. By comparison, Iran is the bloc’s 66th biggest trading partner with less than $24 billion of goods exchanging hands, according to data compiled by Bloomberg.

“There’s a lot of fear about a world in which the U.S. dollar could be undermined as a trade currency,” said Laura von Daniels, who tracks transatlantic finance for the German Institute for International and Security Affairs. “It’s not as though the German public has been vocal in wanting Angela Merkel to keep the JCPOA, whereas they do want her to act against automobile tariffs.”

U.S. Sanctions Return in Two Stages

August 6

November 4

Iran restrictions on dollar purchases Sanctions on oil-related transactions Sanctions on gold, precious metal trades Sanctions on transactions with Iran Central Bank Sanctions on supply of graphite, aluminum and industrial software Sanctions on supply of specialized financial messaging software Sanctions on automotive sector Sanctions on underwriting and insurance services Sanctions on purchase, facilitation of Iranian debt Sanctions on energy sector Source: White & Case; Note that list isn’t comprehensive

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