Collision on Course? An Assessment of EU-US Fall-Out Over the JCPOA
25 Dec, 2018 · 5536
Manuel Herrera assesses the economic, military and institutional costs of a EU-US dehyphenation in light of sanctions on Iran
President Donald Trump’s decision to withdraw from the Joint Comprehensive Plan of Action (JCPOA) and resume US primary and secondary sanctions on Iran has positioned the EU and the US on a collision course.
There are signs of the EU possibly looking to carve out greater autonomy from US decision-making against the backdrop of these rising tensions. This commentary will analysis the feasibility of this move and the EU's capability to translate it into action, given the intrinsic (inter)dependencies between the US and itself.
Intent Vs Reality
EU’s positions show that the possibility of de-hyphenating itself in economic and security terms from the US is possible. For example, when asked about reactions to US sanctions resumption on Iran, Secretary General of the European External Action Service, Helga Schmid, stated that the EU “will do everything to make sure the JCPOA stays.” The European Commission announced that the EU will invoke the 1996 Blocking Statute and create a Special Purpose Vehicle (SPV) to protect European companies operating in Iran. Yet another instance supporting this argument is recent statements by EU governments (particularly France and Germany) regarding their willingness and interest creating an European Army to reduce EU’s dependency on NATO.
However, these statements and initiatives are better understood as attempts by the EU to build a common and cohesive narrative to overcome the current crisis rather than operationally deployable proposals. Of course, they also suggest that the EU is planning to push back and stand firm in pursuing its own interests, but that does not necessarily imply that the EU can in fact push back in actual terms. This begs the question, what are the economic, military and institutional costs that a divergence from the US would entail for the EU?
Many European companies have major interests in the US. For example, French multinational corporation, Airbus, has one of its main manufacturing and production facilities in the country. North America alone generates US$ 14.6 billion in revenue, accounting for almost 20 per cent of the company’s total revenue. Additionally, many European companies with businesses in Iran transact in US dollars. The French oil and gas company, Total, has 90 per cent of its financing operations managed by US banks, and 30 per cent of its investors are US shareholders. As a consequence, European corporations with economic interests in the US may just abandon their current operations in Iran to avoid being sanctioned because the maths simply does not add up in their favour. In terms of balance of trade, Iran represents less than 1 per cent of EU's global trade, while the US is EU's largest trading partner, responsible for nearly 17 per cent of European trade.
In military terms, the North Atlantic Treaty Organisation (NATO) is considered key for the EU. 22 out of the 29 NATO members are EU member states. NATO is considered essential for the EU’s survival, particularly to balance Russia. The annexation of Crimea by Russia in 2014 and its military actions in eastern Ukraine led to a rethinking of how the EU should deal with emerging Russian expansionism. The decision on how to act was taken at NATO’s February 2015 meeting, not at the EU Council. It was agreed to support Ukraine and improve relations with Georgia through NATO and not through EU institutions. Additionally, EU Common Security and Defence Policy (CSDP) missions are still reliant on NATO assets in terms of access to classified information and NATO planning capabilities for EU-led Crisis Management Operations (CMOs).
Finally, in institutional terms, EU foreign policy decisions must be adopted by consensus among its member states. Due to the fear of possible US retaliation, it is unlikely that all 28 will agree on adopting measures that may be seen as hindering US interests. France has outlined its willingness to consider countermeasures against US secondary sanctions, including establishing the SPV and making the Blocking Statute effective, but Austria has opposed it. The EU Commissioner for Trade, Cecilia Malmström, agrees that implementing the SPV will be very difficult due to this consensus principle.
At this point, despite having the will - which itself has its own set of shortcomings - the EU pushing back against the US appears untenable because of negative economic, military and institutional costs. Given the depth of economic and military ties between the EU (and its member states) and the US, as well as institutional shortcomings, the jury will remain out on whether the EU can eventually muster the political will and capacity needed to safeguard its interests from US actions.
Nonetheless, recent decisions made the US administration under Trump are a wake-up call for Europeans to think about developing the ability to act as an autonomous actor in foreign policy and international security. This will be possible if the EU is able to institute plans that can convert what are currently only narratives into action: the SPV, the Blocking Statute, and an European Army. As it stands, however, despite having some political will towards the preservation of its interests, it is neither feasible for the EU, nor does it have the capacity, to change the course of its relations with the US.
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