Tuesday 16 July 2019

American sledgehammer leaves EU furious as it hits vital gas deal with Tehran

Cartoonist: Ken Lee
Cartoonist: Ken Lee

James Crisp

When Donald Trump announced he was pulling the United States out of the Iran nuclear deal, he took a sledgehammer to the European Union's long-term security, trade and energy strategies and dealt Brussels a painful blow to its pride.

The decision was met with dismay and defiance by Federica Mogherini, the EU's foreign affairs chief.

She vowed the EU would press on with the deal regardless and warned the US president the bloc would protect its "economic investments" in the region.

Ms Mogherini is so proud of what she sees as a major foreign policy triumph she keeps a framed, signed copy of the deal in her office.

The agreement to stop Iran developing nuclear weapons was 12 years in the making and the work began in Brussels, which has repeatedly stressed the agreement is working.

Over the years, huge diplomatic capital and money has been spent and economic sacrifices made by imposing sanctions to finally force Tehran to the negotiating table and ultimately secure the deal.

A protester in Tehran vents her disapproval of the United States’ withdrawal from the Iran nuclear deal. Photo: AFP/Getty
A protester in Tehran vents her disapproval of the United States’ withdrawal from the Iran nuclear deal. Photo: AFP/Getty

The EU wants to prevent more instability in the Middle East, not least because of the risk of increased migration flows as refugees flee conflict and the potential higher threat of terror attacks.

But Mr Trump's announcement has destabilised EU policy on trade and energy as well. Brussels prides itself on its trade deals. Thanks to EU membership, the bloc argues, it is easier to sell Greek feta cheese, German cars, and French wine around the world.

The EU was Iran's largest trading partner until it agreed to the sanctions regime that the agreement gradually relaxes in return for Iran not developing nuclear weapons.

It has now slipped to fifth, accounting for just 6pc of Iran's trade, and far behind the United Arab Emirates and China, which both account for more 20pc.

After the deal was finalised in 2015, the European Commission sent an unprecedented delegation of no fewer than eight commissioners to Iran to begin talks on opening trade and energy links.

In 2016, Iranian imports to the EU increased by 344.8pc and EU exports increased by 27.8pc. The EU exported over €8.2bn worth of goods to Iran with almost €5.5bn worth going the other way. This was expected to increase even further as Iran continued to fulfil its obligations under the nuclear deal.

European businesses have made investments which are now at risk from Mr Trump's threat of sanctions on countries "helping" Iran.

The US ambassador in Berlin has already told German companies to begin winding up in the country.

European companies will look to Brussels to protect their interests, giving EU officials a major headache as they strive to avoid a full-blown trade war over Mr Trump's threatened tariffs on EU steel imports, which Brussels says break WTO rules.

Rising oil prices, triggered by Mr Trump's announcement, are now posing a risk to the European economy, which has finally shown signs of recovery after years of recession.

Iran was also an important part of the EU's strategy to wean itself off Russian gas, which was brutally exposed by the Ukraine crisis. Russian President Vladimir Putin had cut off gas supplies to the EU, the majority of which pass through Ukraine, to heap pressure on Kiev and Brussels.

Iran, which has the world's second largest natural gas reserves after Russia, was identified as the EU sought to diversify its energy suppliers to prevent being held to ransom again.

Natural gas is seen as a low carbon alternative to polluting fossil fuels by EU officials, making Iran even more attractive as it would help the bloc hit its climate commitments under the Paris Agreement. The bloc hopes, as it did with the Paris Agreement, to convince the international community to save the deal and isolate Mr Trump.


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