Hawks on Capitol Hill are preparing to go head-to-head with European countries that intend to continue business with Iran in the wake of President Donald Trump’s decision to withdraw from the 2015 Iran nuclear deal and reimpose all related U.S. sanctions.
Several congressional offices are mulling an external memo, obtained by THE WEEKLY STANDARD, which recommends seven steps for deterring potential European attempts to evade U.S. sanctions. Trump’s National Security Adviser John Bolton said Tuesday that the freshly reimposed sanctions will come into effect “immediately.” Entities looking to do new business with Iran in “prescribed areas” will face sanctions, while companies with existing business will have 90 or 180 days to “wind down” their activities.
The memo circulating on the Hill, drafted by senior adviser at the Foundation for Defense of Democracies Richard Goldberg, suggests that U.S. policymakers send a strong signal to Europe regarding any potential tariff-based response to U.S. sanctions.
“Make clear to European interlocutors that any attempt to respond to the re-imposition of U.S. sanctions through tariffs will negatively impact the ongoing negotiations over steel and aluminum tariffs—with a likely U.S. escalation targeting Europe’s strategic economic sectors,” writes Goldberg, a longtime critic of the nuclear deal. “The message: keep trade negotiations separate from the issue of Iran sanctions—the consequences of mixing the two issues could be devastating for Europe.”
France, Germany, and the U.K. said in a joint statement Tuesday that they will remain in the Iran nuclear deal, which envisioned the lifting of crippling sanctions on Iran in exchange for nuclear restrictions. After the deal was struck, European business with Iran increased—raising questions about whether European countries will now attempt to protect businesses from U.S. sanctions or whether they will be forced to go along with them.
The document suggests making clear that the U.S. “will not make exceptions to its sanctions outside of those prescribed by law” and recommends firing a warning shot by imposing sanctions on the “first bank or company found to be in violation of U.S. sanctions.” Treasury Secretary Steve Mnuchin told reporters Tuesday that potential exemptions would be considered on a case-by-case basis.
A senior GOP congressional aide who is evaluating the paper predicted that Europe would end up complying with U.S. sanctions. “The Europeans are not going to get in the way as the Trump administration begins to reimpose our sanctions, and they’re going to comply after those sanctions are re-imposed,” they said. “U.S. leverage is just too overwhelming, and the Iranian economy is just too insignificant.”
Goldberg, asked Thursday by TWS about the expected European response, echoed that assessment. He focused attention on SWIFT, a financial messaging system that facilitates millions of payments between banks and other institutions around the world each day.
“Behind closed doors, European diplomats are finally admitting that their companies will fully comply with U.S. sanctions going forward,” he said, and added: “We now need to focus our pressure on the board of SWIFT to disconnect Iranian banks as required by US law.”
In the memo, Goldberg advised reminding every member of the SWIFT board that they are subject to U.S. sanctions if the global transaction network does not disconnect any redesignated Iranian banks, including the Central Bank of Iran.
The document also recommends reminding European governments about the intricacies of the re-imposed sanctions. This includes a warning that “U.S. financial sanctions apply to all “foreign financial institutions,”” including “central banks or foreign state-owned or -controlled banks.” “Countries that consider shifting their payment processing from private institutions to central banks will put their financial systems at serious risk,” the document reads. Another recommendation: tell insurance or re-insurance companies that providing insurance or underwriting services for Iran-connected projects places them “at serious risk of violating U.S. sanctions.”
A European Union statement released Wednesday reiterated the EU’s commitment to continued Iranian sanctions relief. “The lifting of nuclear related sanctions is an essential part of the agreement,” the statement said. “The EU has repeatedly stressed that the sanctions lifting has a positive impact on trade and economic relations with Iran.”
Trump’s ambassador to Germany, meanwhile, warned companies that U.S. sanctions “will target critical sectors of Iran’s economy” and advised them to “wind down operations immediately,” triggering criticism from Europeans. The head of the German-Iranian Chamber of Commerce Michael Tockuss said Wednesday that Europe is sticking to the deal and “will not accept” the U.S. sanctions.
“We should not accept that American law is applicable for third countries and for companies outside the U.S.,” he said. “One of the things which give us a certain confidence is that our European leaders and the European community are now working on measures to protect European companies from U.S. sanctions.”
A senior State Department official told reporters Tuesday that the U.S. is looking to re-create the atmosphere of economic isolation that drove parties to the table for the Iran deal.
“The leverage that we gained from the secondary sanctions is what we used throughout the world with engagement to get countries to partner with us to build the economic isolation of Iran. That’s what we want to do again,” the official said. “It’s not about sanctioning foreign companies; it’s about using the leverage and engaging the way we did before.”
Trump said Tuesday that the U.S. would be working with its allies to secure “a real, comprehensive and lasting solution to the Iranian nuclear threat” that also addresses Iran’s ballistic missile program, support for terrorism, and influence in the Middle East.
Of Iran’s leaders, the president said: “They are going to want to make a new and lasting deal, one that benefits all of Iran and the Iranian people. When they do, I am ready, willing, and able.”
Some have expressed concerns that the administration’s reimposition of sanctions will further alienate Europe and will be ineffective.
“If this administration goes forward and starts to impose secondary sanctions on our European allies … that will only further drive a wedge between the United States and its closest allies,” Adam Schiff, the top Democrat on the House Intelligence Committee, said Thursday. “What made these sanctions so effective is that the world was in unison on them, and that will no longer be the case.”
Schiff added that the reimposition of sanctions would “accelerate a drive” to develop alternative financial messaging services, which he said would in turn “undermine the U.S. ability to use sanctions to avoid conflict in the future.”
Among the transactions affected by Tuesday’s nuclear deal withdrawal are multibillion dollar agreements by Boeing and Airbus for the provision of commercial jets. Mnuchin told reporters that the licenses for those sales will be revoked.
Read the complete memo below.
