The European Union's Counterproductive Iran Sanctions

The Case for Pulling Back


Camera crews stake out the Iranian Embassy in central London before Britain's call for stronger economic sanctions on Iran. (Ki Price/Courtesy Reuters)

By signing on to wide-ranging sanctions against Iran in late January, the European Union made a bet that harsh economic penalties would finally push Iran to  comply with its international obligations, especially that it end its efforts to enrich uranium to weapons-grade level and accept a verifiable inspection regime under the International Atomic Energy Agency (IAEA). This is a long way from the "critical dialogue" framework the European Union favored throughout the 1990s, when it aimed to normalize ties with Tehran as a way of fostering domestic reform and empowering moderates. It is also a departure from the so-called EU-3 diplomacy of the last decade, whereby France, Germany, and the United Kingdom looked to negotiate a compromise with Iran on its nuclear program on behalf of the wider international community. In the past, even when Brussels threw its full weight behind UN sanctions -- for example, in December 2006 -- European officials were quick to follow up with statements highlighting their preference for diplomacy and engagement. (By January 2007 officials were calling for a "negotiated long-term solution.") This time, however, Europe seems more decisive. As European Council President Herman Van Rompuy explained earlier this month, "More pressure on Iran, more sanctions on Iran" is now the order of the day.

Despite what Iranian officials claim, the United States is not behind Europe's new stance. In fact, over the past two decades, the European Union has been surprisingly resistant to U.S. pressure. It regularly rejected the demands of the Clinton and George W. Bush administrations to embrace Washington's strategy of neutering the Islamic Republic through economic and political isolation. In 1996, for example, the Clinton administration passed the Iran-Libya Sanctions Act (ILA), which imposed mandatory penalties on any foreign country that invested more than $20 million in Iran. In response, the European Union, through its then trade commissioner, the former British Cabinet Minister Sir Leon Brittan, stated its adamancy that the United States was "not entitled to impose their will on us" and lodged a note of formal noncompliance with the ILA at the World Trade Organization. To drive home the point, a spokesman for the German Foreign Ministry expressed the view that the "U.S. follows the wrong path." At the same time, France even publicly thumbed its nose at Washington, declaring that it would make upgrading ties with Iran a major foreign policy objective. The country's Foreign Ministry spokesman, Yves Doutriaux, was even more explicit. The U.S. move, he said, "Is one nation telling the rest on earth what they can and can't do. Is that right?"

The European Union has its own reasons for acting now -- with the unanimous support of all 27 member states -- only a year after a much less extensive list of sanctions put forward by the EU-3 failed to gain full backing. The first is anger over Iran's failure to reply formally to a letter the European Union's foreign policy chief, Catherine Ashton, sent last October offering to restart nuclear talks. Ashton wrote on behalf of the P5 plus 1 (the five permanent members of the UN Security Council and Germany), but the snub was felt most sharply in Europe, which has worked to cultivate a role as the main point of contact between Iran and the international community.

The timing of the new sanctions is also a function of the upcoming elections in Iran and the United States. Before Iranian parliamentary elections in March, the European Union wants to send a message that it is willing to adopt as tough a line as Washington takes in the hopes of convincing the Iranian electorate to express its dissatisfaction with the current regime at the ballot box. It also wants to force concessions from Iran before the U.S. presidential election potentially ushers in a Republican president committed to stopping Iran's nuclear program through military means. Not only do many EU policymakers hold an ideological aversion to war, they fear that it would play havoc with world oil supplies and might even result in an Iranian-sponsored terror campaign on European territory.

More broadly, Europe's new aggressiveness stems from an IAEA report published last November, which claimed that Iran was looking to develop a nuclear weapons capability. Other reports published this year have made the case that Iran is making progress in enriching uranium to weapons-grade level at military sites. Taken together with the IAEA report and its own assessment of Iran's goals and capabilities, the union has come to realize that although positive diplomacy has made some headway toward improving Iran's human rights record, it has been an ineffective instrument for stopping Tehran's nuclear weapons program. And the time is right to try something else: The European Union is convinced that an Israeli military strike on Iran's nuclear sites is a real possibility in the coming year. And that could lead to the nightmare scenario of a full-scale regional war on Europe's borders.

For all these reasons, Europe has made a priority of defusing tensions and quieting talk of war, which could set back its own economic recovery and destabilize the Middle East for decades. To that end, it is willing to sacrifice its prized spot as Iran's number-one trade partner in non-petroleum products. The European Union, which imported about 450,000 barrels of Iranian oil per day in 2011, is also prepared to absorb the economic cost of a pre-emptive Iranian ban on oil sales to Europe before the European oil embargo starts in July 2012. Earlier this month, Tehran cut off oil to France and the United Kingdom. That was bad enough: It pushed the price of gasoline in the United Kingdom to £135.39 ($212.62) per liter, up from £132.25 ($207.70) at the beginning of January. It also resulted in near-record oil prices across Europe. The damage will be much greater if Iran extends its ban to Greece, Italy, and Spain -- the EU countries most vulnerable to the ongoing financial crisis and most dependent on Iranian oil.

Given the potential economic downside of the move and the European Union's past failure to act in a united manner on highly charged international issues, the union deserves credit for banding together. In the last few years, French President Nicolas Sarkozy has pushed for an increasingly tough line on Iran, even accusing U.S. President Barack Obama of being too soft in the early years of his presidency. But his efforts fell on deaf ears. The EU-3's success in getting the rest of Europe on board this time shows that, given the right set of internal and external circumstances, the union can act together in a forceful way on major international issues. No less important, the push against Iran points to the failure of Tehran's long-time efforts to exploit the gap between European and U.S. policies.

None of this is lost on Iran -- note the country's pre-emptive oil-export bans and condemnation of the European Union's move as "psychological warfare." Meanwhile, Tehran also finally responded to Ashton's letter through its chief nuclear negotiator, Saeed Jalili, expressing a readiness for dialogue and "new initiatives." Iran's foreign minister, Ali Akbar Salehi, has also promised new talks with the P5 plus 1. In no small part because of Europe's new posture, Iran is feeling the heat.

Despite these successes, Europe has failed to demonstrate to Iran and the international community that, if it acts in a united and decisive fashion, it can get other key players to follow suit. Japan and South Korea are nonplussed by the European Union's sudden turn, and Russia and China have dismissed the new strategy out of hand. Instead of bowing to European pressure, India, which recently overtook China as the number-one buyer of Iranian oil, is more interested in lecturing the European Union on the importance of diplomacy and organizing trade delegations to Iran to capitalize on the European Union's de facto withdrawal from Iranian markets. And to add insult to injury, China, India, and Japan have all proved grudgingly willing to cut their oil imports from Iran by about ten percent in the face of pressure coming from the United States. In other words, they do not see European hawkishness as mattering all that much.

The failure to bring other world powers along undermines the European Union's efforts to present itself as the lead international mediator on Iran. Ultimately, if the sanctions policy does not yield Iranian concessions or if Europe cannot make its case to its international partners, it might marginalize the European Union as leader of the P5-plus-1 process. Despite its faults, the union used to play an important role in balancing the extreme positions of the United States on the one hand and China and Russia on the other. If it can no longer play this part, the prospect of an internationally negotiated settlement to the Iran crisis would be far dimmer. A failed sanctions policy could also lead some EU states to conclude that the only remaining option is the military one. This would result in a potentially irreparable split in the European Union that might even signal the end of the union as a credible player in international affairs.

In order to avoid losing influence and hastening the journey toward war, the European Union should work to rebuild trust and cooperation with Iran even as it pursues sanctions. The EU-3 -- the initiators of the hard-line policy -- could encourage smaller member states to play a bigger role in trust building. In other words, the EU-3 could double down on pressure while the rest of the union tries diplomacy. Ireland, a champion of the Nuclear Nonproliferation Treaty (NPT) since the early 1960s, and Sweden, an outspoken proponent of positive diplomacy with good bilateral relations with Iran, could drive home the merits of cooperating with international institutions, as well as the benefits of a renewed focus on trade and development ties with Europe.

Notwithstanding the European Union's current belief in the power of sanctions, Europe has generally proved most effective in conflict resolution when playing the role of state builder. It should capitalize on its experiences in the Balkans and the Palestinian territories to help develop Iran's infrastructure in return for Tehran's cooperation on the nuclear front. In doing so, it can draw on the vast expertise of European firms that were deeply involved in Iran's various economic redevelopment plans following the end of the Iran-Iraq War in 1988. The European Union has already proven that, armed with its very generous export guarantee mechanism that shared credit risk with banks financing European firms selling to Iran and provided the firms themselves with protection against losses, it can dominate key sectors of the Iranian economy, including machinery, transportation, manufactured goods, and food. Now, it should move beyond the pursuit of profit and look to develop these sectors and others to help a faltering Iranian economy and to build confidence between Europe and Iran. 

The European Union should also take seriously Salehi's statement on February 19 that his country wants future talks to provide a "win-win" solution to the current impasse. After determining what winning means from an Iranian perspective, Brussels could use the political capital it has gained in Washington from taking a hard line to bring the United States on board for negotiations. There is every chance that this approach would be viewed as evidence of European indecision and weakness in Tehran and Washington. But the alternative is a strategy that consists of ratcheting up sanctions and rhetoric until Brussels has squandered all its influence on Iran and much of its credibility with the rest of the international community. That would be bad for Europe and even worse for the chances of a peaceful resolution to the Iran crisis.

Read more at ForeignAffairs.com. Also, keep in touch with our weekly newsletter. Like us on Facebook and follow us on Twitter.

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