Time for Europe to Launch SPV, Show Some Autonomy: Italian Analyst

“So the defense of the JCPOA or the Joint Comprehensive Plan of Action is really critical for Europe. Whether Europe can do something about that, it is going to be critical for Europe’s ability to preserve some important margins of autonomy from other countries, in this case the United States. If the Europeans fail to set up the SPV, for instance because no one wants the SPV to be placed in their own country, Trump’s point that brute power is the only thing that matters in international relations and that the allied countries are in fact vassal states will have been validated,” Riccardo Alcaro told Tasnim.

Riccardo Alcaro was a nonresident fellow in the Center on the United States and Europe. He is an expert in transatlantic political and security relations with a focus on US-European cooperation in Europe’s neighboring regions, including the Middle East and North Africa, Iran and the Persian Gulf, the Sahel, Eastern Europe, and Russia.

Following is the text of the interview.

Tasnim: As you know, recently US President Donald Trump imposed a new wave of sanctions against Tehran despite opposition both from inside the US and European countries. What is your take on the sanctions?

Alcaro: Well, it is a very significant consequential move by the US president with several dimensions. One dimension is certainly the relationship between the Unites States and Iran. This is clearly a hostile act depicted as a response to Iran’s ‘irresponsible’- the (US) administration likes using the term ‘malign’- activities in the region. The administration has not been able to claim that Iran was not fulfilling its obligations under the nuclear deal. Because, according to the International Atomic Energy Agency’s reports, Iran has been fulfilling its obligations but the Trump administration has seized on the preamble of the agreement where it stated that this agreement should serve as a platform for further engagement and constructive relations so argues that Iran is violating the spirit, not as far as its nuclear behavior is concerned but as far as its regional behavior is concerned. In addition, the Trump administration has argued that the nuclear deal is too soft on Iran; it does not re-define Iran not to pursue the nuclear weapons action, if not temporarily because the Trump administration has popularized this idea, which is certainly not accurate, that Iran would be free to get a nuclear weapon between 2025 and 2030, which is when the main limit on Iran’s ability to enrich uranium expires.

In fact, the Trump administration has from the beginning taken a very, very confrontational stance on Iran, and its Middle East policy and particularly Iran policy is run by a group of persons who are convinced that the United States’ interests in region are to contain Iran. They have made a number of demands to Iran for the sanctions to be lifted. They have actually even promised more benefits than a nuclear deal includes, but in order to get those benefits Iran would have to abide by much more limits in terms of nuclear development and also do a number of things that if you combine them together, will eventually amount to capitulation and also fundamental retreat by Iran from its fundamental security policy pillars, including the ballistic program, its support for proxies in Syria, Iraq and Yemen. So this is the first dimension.

The second dimension is a transatlantic dimension. This is really, really critical. The nuclear deal was mostly a result of a multilateral effort in which the transatlantic dimension was critical. By re-imposing sanctions against Iran and against the will of the Europeans who are parties to the deal, Trump has shown no regard for Europeans’ sensitivities, interests and requests. Trump has also threatened to use the sanctions that are being re-imposed, the so-called secondary sanctions, against EU companies and banks willing (to continue) trade and investment in Iran. So, basically, Trump is betting on America’s superiority and dominance on financial markets to compel other countries, including America’s allies, to align with a regime, not jointly agreed upon, not legitimated by the security council of the United Nations, but decided entirely in Washington and in isolation.

Tasnim: What is your idea about a special purpose vehicle proposed by Europe to streamline trade transactions between Iran and the EU? What country would finally host the payment system?

Alcaro: We do not know that either. This special purpose vehicle is critical in many respects. The first one is that if enacted, it should enable a minimum level at least of trade and investment between European companies and Iran, but actually not only European companies because companies from extra EU countries can also use that, including China and Russia. Of course, even if it becomes operational, this instrument would be absolutely incapable of compensating for the loss of the Unites States but it will still assure a certain amount of trade particularly oil, humanitarian trade, medicine and stuff like that. But politically, it would have a huge importance because it would signal that the European Union and its member states are willing to put their money to defend the deal with deeds and not just words, and to keep a channel of communication and engagement with Iran open because the European Union, particularly France, Germany and Britain along with High Representative for EU’s Foreign Affairs and Security Policy Federica Mogherini have repeatedly stated that the deal is in Europe’s security interests, non-proliferation interests, and economic interests.

So the defense of the JCPOA or the Joint Comprehensive Plan of Action is really critical for Europe. Whether Europe can do something about that, it is going to be critical for Europe’s ability to preserve some important margins of autonomy from other countries, in this case the United States. If the Europeans fail to set up the SPV, for instance because no one wants the SPV to be placed in their own country, Trump’s point that brute power is the only thing that matters in international relations and that the allied countries are in fact vassal states will have been validated.

Tasnim:  The Trump administration has said that it would be able to cut Iran’s oil exports to zero. However, eight countries have been given exemptions. Do you think it would be possible to do that?

Alcaro: let me start by the exemptions. This is not an exemption. These eight countries among them China, India, South Korea and also Italy are main importers of Iran (‘s oil). They have not been exempted; they have been given an extension. They can continue importing oil from Iran for about six months, but in six-month time they are expected to assign with US sanctions, otherwise they will be punished. Not the countries, the companies of course. The US sanctions, the secondary sanctions, do not target other countries. They target just Iran. But in order to target Iran, they actually threaten companies from other countries with fines and restrictions if they do business with Iran. Of course, these companies need to have some presence in the US economy, and even though not our companies have a presence in the US economy, those companies, particularly exporting companies need some banks to fund, to give them credit in order to be able to export. Basically, 99 percent, 95 percent, I do not know the percentage but it is very, very high, of banks are exposed to US financial markets.  As of now, the Unites States is still bent on bringing Iran’s exporting capacity to zero. The extension of six months given to these eight countries has only one rationale. The United States does not want to disrupt entirely the energy market. It fears that taking the Iranian oil off the table, suddenly in a single stroke would have created the conditions for an energy price surge. So these countries are expected to work on alternatives during these six months exactly as what the European countries did between January 2012 and July 2012 when the European Union, before the deal was struck, imposed an oil embargo on Iran but gave its member states six months to adopt.

So, is this strategy going to be effective? It is very difficult to say. The United States has proven that secondary sanctions are extremely effective. European companies have been leaving Iran very quickly after Trump re-imposed sanctions. And not only European companies, but companies from other countries, including China. So secondary sanctions have proven their effectiveness; however, because secondary sanctions have been re-imposed unilaterally, this has created huge resentment in Europe, Russia, China and in other countries… so this behavior (by the US) does not make many friends.