In just a few days, the United States government will re-impose blistering sanctions on Iran targeting the financial and energy sectors. The administration’s stated goal is to bring Iran back to the negotiating table for a comprehensive deal that not only deals with their nuclear activity, but one that would also attempt to limit their malign influence and their production of ballistic missiles.
If it feels like deja vu, it is. In 2010-2011, I was the deputy U.S. Treasury attache in Saudi Arabia, where one of our main goals was to promote CISADA, the comprehensive sanctions designed by the Obama administration to inflict as much pain as possible to bring Iran to the negotiating table. The pain worked — while the competence of the American team and the effectiveness of the deal is debated, the pressure campaign did indeed help force negotiations.
The Trump administration faces an even tougher battle than did Team Obama as it relates to Iran. Since the president pulled out of the JCPOA, the EU has been working feverishly behind the scenes to protect the relationship between Europe and Iran, including publicly calling for a special purpose vehicle to help businesses avoid American sanctions, and the implementation of a blocking statute also intended to protect European businesses. The EU goal is to continue with the Iran deal alone, without the U.S., by creating a financial channel between their central banks with the Central Bank of Iran. The Trump administration has made it clear, however, that they will compel the Europeans to comply with the new sanctions— either by carrot or by stick.
This means one more rift in the transatlantic alliance. But for the Trump administration, a new and unexpected ally has emerged: European business. The American ambassador to Germany, Richard Grenell, has made pressuring Germany on Iranian sanctions his signature issue. While European governments were making heated announcements about their opposition to the American sanctions, major German companies began announcements of their own: They are leaving Iran, ceasing projects, ceasing to sell auto parts, etc. From the perspective of a corporate CEO, the decision is clear. On the question of doing business in the U.S. or Iran, they choose the American market. In fact, these same CEOs have reportedly made it clear to Ambassador Grenell that not only will they comply with sanctions, but in fact they are not supportive of the EU government’s talk of evading said sanctions.
What is lost on European governments, but not to business leaders, is that Iran has proven to be a difficult place to do business. After its 30 years of effectively being out of the mainstream of world economics, many emerging market entrepreneurs were salivating to reach a new and potentially explosive untapped market. What European businesses have found instead is a lack of trust with their Iranian business counterparts, inability to get payments on time, and endless arguments over terms. Moreover, after the huge fines paid by European banks to American regulators during the Obama administration, many financial institutions and corporations were loath to enter the Iranian market in the first place.
Former Obama administration officials will mock the effort by Ambassador Grenell and the Trump administration. They do not believe that President Trump will get the Iranians to the table again. And by all accounts, the Iranians have dug in. Iranian President Hassan Rouhani has bragged to his parliament in recent days that Europe has “abandoned” the U.S. on this issue, and even went as far to say, “A year ago no one would have believed that Europe would stand with Iran and against America.” In public, Foreign Minister Zarif expresses an air of confidence with the European wind to his sails. Even former American officials, like John Kerry and Wendy Sherman, have advised the Iranian leadership to wait out the Trump administration — actions which are, at a minimum, highly unethical. But in this fight, Trump is a poker player, and he knows that he holds a full house.
Unless the Iranian regime has a massive change of heart, the new tariffs arrive at the end of this week. And although the president faced tough critics at the U.N., the Iranians have yet to meet a president with this force of will.
On the merits, Trump is right: The JCPOA was a deeply flawed deal that not only failed to prevent Iran from building a nuclear weapon, but also failed to address Iran’s support for terrorism, their malign activities not only in the region but now in Europe, their constant threats of attacks against Israel, and their provocative building and testing of ballistic missiles, a clear violation of U.N. resolutions.
As lines are drawn in the sand, European governments must ask themselves: Is anger at Trump for his tactics worth standing by a brutal regime who has been caught multiple times in the past 6 months planning attacks on European soil? Who just this week tried to assassinate an Iranian dissident in Denmark? Is it worth deepening the wounds of the transatlantic alliance, in order to stand by an enemy of America?
While European governments continue to devise their strategy, it’s clear that the private sector has made its choice.
Morgan D. Ortagus is national security and global affairs analyst, the co-founder of GO Advisors, and the former deputy U.S. Treasury attache to Saudi Arabia.
