At a recent European economic conference, the head of the EU’s Iran task force stated that, if the U.S. were to renew sanctions against Iran that had been removed pursuant to the 2015 nuclear deal, Europe need not go along. He cited the precedent of the 1990s, when Brussels used “blocking regulations” that shielded European companies from the effects of American sanctions on Iran and Libya. But, writes Richard Goldberg, the sanctions now in question are much tougher, and would give Europeans little choice in the matter:
[I]n 2010 . . . Congress passed a new law leveraging America’s greatest strength against the fulcrum of global commerce with Iran: financial transactions. After years of blacklisting most financial institutions in Iran for their involvement in various illicit activities, Congress recognized that it also needed to punish third parties for doing business with these criminal enterprises. Thus, it declared that any foreign bank that maintained a correspondent banking relationship with a designated Iranian bank would forfeit its banking relationships in the United States. . . .
If President Trump decided to enforce these sanctions again, banks around the world would immediately be at risk of losing their correspondent accounts in the United States. Blocking regulations might shield a company from American-levied fines, but they cannot shield a British bank from losing its access to the U.S. financial system. This time around, the downside of U.S. sanctions would far outweigh the upside of Iranian trade. . . . And while diplomats in Brussels may want to stare Trump down and see if he flinches, banks will not want to take that risk.
The British, French, and German governments could help avoid this potential crisis by taking a more thoughtful approach on the Iran deal. Agreeing to repudiate its sunset clauses would avoid a transatlantic train wreck today without violating the agreement for years to come. Demanding verification of the agreement with visits to Iranian military sites would be a step toward enforcing the deal, not breaking it.
Furthermore, nothing in the Iran deal prohibits Europe or the United States from reimposing sanctions related to any Iranian entity—even the central bank—if it is connected to non-nuclear activities such as ballistic-missile development and terrorism. That’s a view shared by both Democrats and Republicans in the United States—and given Europe’s direct security interest in curbing Iran’s missile program and regional expansion, it’s a view that European diplomats should adopt as well.
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