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The Growing Costs of the Iran Obsession

Ishaan Tharoor comments on the creation of Europe’s “special purpose vehicle” earlier this week:

But experts say the move is consequential for its symbolism alone. Western European leaders desperately tried to dissuade President Trump from pulling out of the nuclear deal, which was the product of years of complex diplomacy and which even U.S. intelligence sources believe has effectively curbed Iran’s nuclear program. But Trump took no heed, withdrawing from the accord and reinstating various layers of sanctions on Tehran.

Now, Washington’s closest partners are building mechanisms of defense against it. “This is really the first instance in which Europe is trying to stand up to the coercive economic power the U.S. is wielding,” Esfandyar Batmanghelidj, the founder of the Europe-Iran Forum, said in a phone call with reporters hosted by the European Leadership Network, a think tank in London.

When I spoke at TAC‘s foreign policy conference last fall, I said that I expected European governments to follow through on their announcement to create this mechanism. Our allies are determined to press ahead with this initiative not only because they want to protect the nuclear deal from U.S. sabotage, but also because they see it as a means of asserting their own independence in foreign policy. The SPV is a small step in that direction, but it is significant that it was made at all. It would have been much easier for our allies to accommodate Washington and not challenge sanctions on Iran in this way, but they consider the reimposition of sanctions to be wrong and reject secondary sanctions on their businesses as an illegal intrusion into their affairs.

It is a measure of how badly strained relations are between the U.S. and Europe under Trump that things have reached this point. The growing rift with Europe could have been entirely avoided if Trump had not insisted on reneging on U.S. commitments under the Joint Comprehensive Plan of Action (JCPOA) and then reimposing sanctions. The administration’s overuse and abuse of sanctions are having the effect of forcing other governments to look for ways to get around U.S. restrictions, and that means that U.S. clout will be eroded over time. Henry Farrell and Abraham Newman explain:

Now the United States is deliberately working against these allies — and threatening them with retaliation if they do not knuckle under to its demands that they take action against Iran. The United States threatened action against SWIFT if it did not cooperate in isolating Iran again from international networks. SWIFT has effectively agreed to comply with these U.S. demands. However, American unilateralism is pushing European states to begin to create new financial channels that are insulated from U.S. control. This helps them resist U.S. pressure on Iran in the short run. In the long run, it may create the beginnings of a new financial architecture that could undermine U.S. financial power.

This is the story behind the new Special Purpose Vehicle, which is being set up by France, Germany and the United Kingdom, with support from other E.U. member states. The vehicle creates an alternative system for European firms to do business with Iran, without exposing themselves to dollar transactions and the power of American sanctions. Its initial scope is modest — it is intended for small to medium-sized firms (which are less likely to be exposed to U.S. pressure) engaged in essential transactions (food and humanitarian provision), which are in theory not sanctionable anyway.

However, it is very likely to grow.

Now that our allies have taken the first steps in breaking out of their dependence on the U.S., the consequences of Trump’s Iran obsession are becoming clearer and the costs for the U.S. are growing.

about the author

Daniel Larison is a senior editor at TAC, where he also keeps a solo blog. He has been published in the New York Times Book Review, Dallas Morning News, World Politics Review, Politico Magazine, Orthodox Life, Front Porch Republic, The American Scene, and Culture11, and was a columnist for The Week. He holds a PhD in history from the University of Chicago, and resides in Lancaster, PA. Follow him on Twitter.

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