Trump's decision to nix Iran deal adds to tensions

IN a landmark foreign policy decision, US President Donald Trump announced on Tuesday that he will not recertify the Iranian nuclear deal. However, his decision was immediately countermanded by French, British and German leaders Emmanuel Macron, Theresa May and Angela Merkel who declared that their nations will not just remain signatories to the agreement, but will work "collectively on a broader framework" with Teheran in 2018 and beyond.

Mr Trump's decision is not just controversial in Europe - for instance Senator Bob Menendez, the ranking Democrat on the US Senate Foreign Relations Committee called it "a grave mistake". Yet, it is the clash between the United States and the EU on this issue which is most striking, setting the scene for significant transatlantic tensions in coming weeks, not least with separate bilateral battles over trade issues.

Of course, deep US-European discord over Teheran is not unprecedented. In the 1990s, significant disagreements surfaced when Washington adopted legislation - including the Iran and Libya Sanctions Act (ILSA) - which punished European firms for doing business in those countries. In response, Brussels agreed on reciprocal steps to protect European businesses and adopt counter-measures against the United States where restrictions were imposed by Washington.

A similar pattern may now play out again following Mr Trump's decision. It is clear that the US president feels strongly about the Iran issue, claiming that the agreement is "a great embarrassment" and "a giant fiction", given that "we cannot prevent an Iranian nuclear bomb under the decaying, rotten structure of the current agreement".

Given such rhetoric, it appears unlikely that he will row back from his decision, although Treasury Secretary Steven Mnuchin said on Tuesday that Washington "will continue to work with our allies to build an agreement that is truly in the best interest of our long-term national security". The practical import of Mr Trump's announcement, which had to be taken by May 12, is that he will no longer renew the waiver on sanctions which will now be re-imposed on key sectors, including energy and petrochemicals.

This will not immediately lead to the imposition of sanctions. Instead, those companies doing business in Iran have a period of time to, potentially, wind down operations there.

BALL IN EUROPE'S COURT

Following Mr Trump's decision, the ball is now in Europe's court; and indications are that the continent's leaders want to try to preserve the deal. Iranian President Hassan Rouhani also said on Tuesday that Teheran might not itself pull out of the agreement if other signatories (not just France, United Kingdom and Germany but also China, Russia) remain committed to its terms. At the same time, however, he warned that he has instructed the country's atomic energy agency to prepare to restart enrichment of uranium in a few weeks' time should the deal collapse completely. Not only does Europe want to make the deal work, but Mr Macron indicated again on Tuesday that France, Germany and the United Kingdom "will work collectively on a broader framework, covering nuclear activity, the post-2025 period, ballistic activity and stability in the Middle East, notably Syria, Yemen, and Iraq".

Yet, there is no doubting that European leaders are disheartened over Mr Trump's decision which comes after high-level lobbying in Washington from Mr Macron, Mrs Merkel and UK Foreign Secretary Boris Johnson in recent weeks. While Mrs Merkel and Mr Johnson made no apparent headway, there were signs of potential compromise when Mr Macron met Mr Trump.

Mr Macron said on April 25: "I think we (will) . . . work towards a (new) deal, an overall deal that will enable us to deal with the nuclear issue, but also treat it together with other issues which are not being dealt with so far." From this European perspective, the 2015 nuclear agreement would be only the "first pillar" of a broader framework that would also restrict Iran's regional influence, its ballistic missiles and its nuclear activities post-2025, when the existing deal expires.

Mr Trump had indicated last month that such an agreement may be acceptable to him, saying to Mr Macron: "You know, in life, you have to be flexible, and as leaders of countries, you have to show some flexibility . . . We could have at least an agreement among ourselves fairly quickly . . . I think we're fairly close to understanding each other."

Yet, ultimately, this dialogue came to nothing. And a key question for Europe is therefore how far to push back against Mr Trump.

While EU decision makers have been reluctant to be too explicit in public on this issue, many have been scenario planning for weeks. Former UK foreign secretary Jack Straw has argued that it will be possible for the continent to continue to trade with Iran by blocking any US sanctions on European firms that trade with Teheran.

TAKING A SIMILAR PATH

Europe took a similar path after Washington passed the ILSA legislation in 1996. Then, Brussels approved measures to neutralise the law asserting that the United States should not be able to impose such measures with such an extra-territorial effect.

Despite this precedent, the newly re-imposed US sanctions could yet critically undermine European attempts to preserve the Iran agreement. For instance, only European firms with little or no economic interests in the United States may prove likely to want to trade with Iran given the potential risks, including fines from the US Treasury.

Taken overall, transatlantic tensions will now jump again following Mr Trump's decision over Teheran - and this could make for a tricky G-7 summit next month. While Europe will seek to preserve the agreement with Teheran, its future may be precarious in coming months.