Not all that long ago, it seemed as if the United States could learn a thing or two from Europe when it came to economic pressure on Iran. Today, a great deal has changed.
Even as the fledgling Obama administration stuck doggedly to its "engagement" policy toward Tehran, European capitals were rapidly heading in the opposite direction. In November 2009, in a move that caused nothing short of a political earthquake on the Old Continent, a majority of the Dutch parliament formally voted to place Iran's clerical army, the Islamic Revolutionary Guard Corps (IRGC), on the European Union's terror list.
The decision was in part a reaction to the Islamic Republic's brutal crackdown on the grassroots protests that had followed Mahmoud Ahmadinejad's controversial reelection to the Iranian presidency that summer — a move that sparked outrage among foreign observers. But it was also a policy broadside aimed squarely at the Iranian regime's rogue behavior writ large.
The Iran Revolutionary Guard "is increasingly functioning as the most important instrument of the present regime," the Dutch resolution noted. "This organization has played a leading role during the bloody suppression of the recent popular protests and ... is increasingly active in facilitating international terrorism, [including] support to Hamas, Hezbollah and anti-Western militias in Iraq." In response, it urged the Dutch government "to advance that the European Union places the Iranian Revolutionary Guards on the European list of terrorist organizations."
The move was a marked departure from prior practice.
For years, European diplomats had attempted precisely the strategy then being contemplated in Washington as a way of altering the Iranian regime's conduct. To that end, the EU tried to engage the Islamic Republic in a diplomatic process that came to be known as "critical dialogue"— although it in truth entailed precious little criticism — throughout the mid- to late-1990s.
More recently, the EU3 (France, Great Britain and Germany) had sought in vain between 2003 and 2005 to negotiate a compromise with Iran's leaders over their nuclear ambitions. Neither approach was particularly successful, but the Continent's extensive trade with the Islamic Republic led its leaders to nonetheless consistently favor engagement over isolation, and diplomatic carrots over strategic sticks.
Now, it seemed, European leaders were talking — and thinking — tougher. And while the Dutch resolution may have been the most prominent sign of this stiffening resolve, it was hardly the only one. A month earlier, the British government had invoked counterterrorism legislation in order to formally prohibit business ties with Iran's national shipping carrier, IRISL.
The European Commission, meanwhile, was then in the process of carrying out a preliminary feasibility study of sanctions that could be levied against the Islamic Republic. All this, coupled with sterner rhetoric emanating from Berlin, Paris and London, led many to conclude that the EU was on the cusp of a much more robust stance toward the Iranian regime.
What a difference a few years can make.
Even before the signing of the Joint Comprehensive Plan of Action (JCPOA) between Iran and the P5+1 this July, Europe had moved steadily away from a policy of pressure on the Islamic Republic, and embraced anew the idea of engagement and outreach. Virtually from the outset of Western negotiations with Iran in the Fall of 2013, the European Union began to gravitate toward the political (and, subsequently, the financial) rehabilitation of Iran's clerical regime.
This reversal was visible on two separate fronts, the first of which is legal. Specifically, a series of court decisions in recent years have had the effect of significantly rolling back the European Union's sanctions on Iran and its constituent entities. A July 2013 exposé by the Reuters news agency outlined exactly how Europe's courts were systematically "dismantling" sanctions previously levied on Iranian individuals and companies. In all, dozens of Iranian companies and individuals previously censured by the EU have seen decisions against them reversed. Those verdicts, made in part on procedural grounds, arguably have transformed the European Union's own judicial system into the "biggest obstacle" in its effort to maintain pressure on Iran.
Big chance for business
But Europe's courts aren't the only problem. European businesses likewise have assumed a distinctly unhelpful role.
Historically, the countries of the European Union have cumulatively served as Iran's largest trading partner, with billions of dollars in annual two-way trade. That began to change late last decade, as European countries increasingly curtailed their economic ties to Iran in response to mounting international sanctions. As a result, China surpassed the European Union in 2009 to become Iran's biggest trading partner, with an annual turnover of at least $36.5 billion (€33 billion).
Nevertheless, Europe as a whole continues to do a booming business with Iran — one that in 2012 totaled €7.4 billion. And even before the July 14 signing of the new nuclear deal with Iran, those ties were strengthening anew, thanks to slackening international pressure on the Islamic Republic.
This has been visible in a flurry of new activity in various Iranian economic sectors, from the automotive industry to petrochemicals, as European companies — previously restrained in the amount of business they did in the Islamic Republic — began to broaden their presence there in tandem with the P5+1's nuclear diplomacy.
That scramble for reengagement was propelled by the view that, as one German business executive told Hamburg's Der Spiegel last year, post-sanctions Iran could be nothing less than the economic "chance of a century." And, predictably, since the signing of the JCPOA, the floodgates have opened in earnest, with delegation after delegation from leading EU member states making their way to the Islamic Republic in an effort to exploit the tantalizing new economic opening.
Iranian officials, for their part, are doing everything they can to help them. Last year, for example, the Iranian regime formally changed the requirements governing international oil contracts in the Islamic Republic, making them joint ventures — and therefore much more attractive to foreign investors. And, in recent weeks, the Iranian regime has welcomed trade delegations from countries such as Germany, England and Italy — all of whom are eager to explore the new "financial opportunities" available in the Islamic Republic, now that the ayatollahs have come in from the cold.
It's no wonder that policymakers in Tehran are taking on a triumphalist tone. As Iranian foreign minister Javad Zarif recently told a meeting of the Strategic Council on Foreign Relations, a prominent Iranian think tank, the U.S.-led sanctions regime has "collapsed" and "no one will accept the return of the sanctions (in the future)."
His confidence stems from the fact that Iran's foreign policy czar understands what the Obama administration apparently does not. In their effort to sell the JCPOA to a skeptical Congress, White House officials have repeatedly intoned that Iranian noncompliance with the terms of the agreement will lead to a rapid and comprehensive restoration of international sanctions.
But, as a practical matter, such a "snapback" is little more than fiction, because — although a relaxation of economic pressure may be a relatively complicated endeavor in Washington — it is a much more straightforward one in Europe.
First, the U.S. sanctions regime erected against the Islamic Republic over the past decade-and-a-half is "hybrid" in nature, aimed simultaneously at Iran's nuclear program, its support for international terrorism, and its domestic human rights abuses. Europe's, by contrast, is not; the economic penalties levied to date by eurozone nations focus overwhelmingly on the Iranian regime's nuclear development and proliferation practices, and are therefore far easier to repeal.
Additionally, while the JCPOA may still not be a fait accompli on Capitol Hill, where a number of prominent American legislators have signaled their official disapproval of its terms, it is already a political reality in Europe. Less than a week after the agreement's passage, it was formally approved by the European Union in what was intended as a clear signal to the U.S. Congress to do the same.
European businesses are proceeding accordingly, and their deepening engagement is bound to make the Continent as a whole increasingly allergic to precisely the type of sanctions "snapback" that has been promised by the White House.
The end result is a situation in which Europe's growing political and economic stake in the Islamic Republic virtually guarantees that Iran won't return to its old status as an international pariah, whether or not it ends up abiding by the terms of the JCPOA. The lesson, it seems, is that trading with Europe means never having to say you're sorry.