Despite the fact that the JCPOA remains unfinished business, a provisional assessment can be offered of the geopolitical effects of the US sanctions regime on Iran and of the EU/E3’s post-2018 engagement with the nuclear deal. Chief among these is the observation that the US policy turnabout on the JCPOA from negotiated compromise to confrontation has so far destabilised the Middle East by choosing polarisation and conflict over cooperation and diplomacy. Despite its best intentions and some actions to the contrary, the practical effect of the EU/E3’s lack of meaningful resistance to US policy has been that it effectively aided and abetted this development.
The present status quo is much more harmful to Iran than to the US as the latter’s choice of waging economic warfare via sanctions has leveraged Washington’s financial dominance of the global economy. There is no short-term alternative to this situation given the difficulty of replacing or duplicating existing financial practices, networks and institutions; the existing level of state control over the Chinese economy; the weakness of the Russian economy; and the fiscal and monetary shortcomings of the Eurozone. In addition, the US ‘maximum pressure’ strategy is now being extended across the region to include Syria via the Caesar Act, and may come to include Lebanon if elements of the Republican Party have their way.
It has become clear that the US administration considers it acceptable to achieve regime change at the price of wholesale economic degradation of other societies – however ruined and frail these might already have been at the hands of their own political elites or because of protracted conflict. While this policy might at first glance seem attractive due to its low financial and human costs, it has significant effects at the international, regional, European and Iranian levels. These are summarised in Figure 1.
International effects are global ramifications of US policy towards Iran and the EU/E3’s acquiescence to its core tenets:
(1) Creating a long-term Iranian dependency on China. The only country that combines a willingness to go against the US with the capability to partner economically at the scale Iran requires is China. Although both countries have enthusiastically signed up to the connective logic of the Belt and Road Initiative (BRI), Beijing did not initially show an inclination to step fully into this role as indicated by the China National Petroleum Corporation’s withdrawal from the development of the South Pars gas field and the noted reduction in Chinese Iranian trade. Neither does Iran wish to be overly dependent on a hard-bargain-striking Beijing. However, China has turned into a lifeline for a reluctant Iran that has little choice in the matter. Recent efforts to work towards a long-term Tehran-Beijing strategic partnership illustrate that both parties are considering a substantial deepening of their relations.
If and when this development is institutionalised through a large-scale increase in institutional ties, scholarships, Mandarin/China-study programmes at Iranian universities and cultural exchanges – as one interviewee suggested – the US will have further complicated its greater power rivalry with China, risking the loss of substantial parts of the Middle East in the process. As to the rest of Iran ‘turning east’, beyond the obvious export of Iran’s natural resources to energy-hungry Asian markets – now mostly blocked by sanctions – this is more rhetorical than practical and more out of necessity than by choice. With the exception of the development of the port of Chabahar, India is too close to the US to serve as a reliable partner (its relative weakness vis-à-vis China makes it dependent on US support), while the rest of Asia has much less to offer.
(2) Handing another nuisance card to Russia. Moscow has great political usefulness to Tehran on the UN Security Council but is much less relevant in terms of trade and commerce, except arms sales. Yet, just as Iran sees Yemen as a way to keep Saudi Arabia distracted from the Gulf, so is Russia likely to view Tehran as a way to distract the US from its actions in the Ukraine, Crimea and elsewhere. In addition, Russia and Iran have their shared venture in Syria to consider. It is likely that Moscow will support Tehran just enough to prevent it from having to capitulate to Washington. There are several ways in which such support can be provided, including sharing Russian experience in US (and EU) sanction evasion and making available its oligarchs and their business networks as outlets for Iranian commerce. But the most obvious way for Russia to ‘use’ Iran as a nuisance card is by teaming up in Afghanistan, where the US is just negotiating its exit after 19 years of inconclusive warfare. Both Russia and Iran have an interest in prolonging or preventing a US exit. Stories about Taliban bounty hunters hired to go after US soldiers could, for example, proliferate.
Regional effects are broader effects in the Middle East of US policy towards Iran and the EU/E3’s acquiescence to its core tenets:
(3) Creating an ‘alternative’ economic order. If Iran proves to be sufficiently resistant to the rising economic pressure of US sanctions, it may yet create an alternative economic axis in the Middle East to the US-dominated Gulf/Israel coalition. It has already started doing so to varying degrees with the help of those countries that are too important to the US to alienate and too close to Iran to ignore. These are Iraq, Qatar, Turkey and the UAE. Iraq is already a key safety valve for the Iranian (informal) economy. Turkey remains a US/European NATO ally, a key player in Libya, Syria and the eastern Mediterranean, and has a customs union agreement with the EU. Its recent tactical alignment with Iran on Libya, the Kurds and Yemen builds on longer-standing mutual pragmatism. This is a significant development given that Turkey opens a window on the world for Iran – especially the EU – that is more difficult to close.
While it is more hostile towards Iran, the UAE nevertheless remains inextricably linked to it (especially Dubai). The reasons for this are many and include the fact that a quarter of Dubai’s citizens are of Iranian descent. Many firms maintain close links and Dubai’s economic model is in significant part based on the facilitation of global illicit financial flows. Its globally networked economy offers plenty of opportunities to exploit the 260 kilometers that separate Dubai from Bandar-e-Abbas. Moreover, the UAE cannot afford to antagonise Iran too much as the tiny Emirates would be the first casualties of any conflict. A few rockets fired over Dubai from the Iranian island of Qeshm would likely suffice to end the UAE’s business model as a global logistical centre and high-grade investment location. It is therefore no surprise that the UAE tends to act cautiously in relation to Iran and that Abu Dhabi’s rhetoric changed quickly after the attack on the Saudi facilities in Abqaiq in September 2019. The recent UAE–Israel deal adds a risk factor for Iran in the sense that hostilities towards the UAE may trigger a US or Israeli reaction, but the UAE’s small size and the geography of the Persian Gulf ensure the basic risk calculation remains the same.
In sum, with political coverage from Russia, an economic floor provided by China, and ‘sanction leaks’ in the form of neighbours and firms for whom ‘Washington is far away and the ocean deep’, it is possible for an alternative regional economic structure to mature. Protected by the Iran-sponsored ‘axis of resistance’, it would have the likely side effect of boosting the global illicit economy, as illustrated by the recent capture of 14 tons of Captagon in Italy.
(4) Making Yemen an even more protracted war. As long as the US maximum pressure strategy continues and is tolerated by the EU/E3, it is likely that ties between Iran and the Houthi in Yemen will continue for the cynical reason that it is an effective and low-cost way for Iran to keep the Saudis embroiled and the US distracted. The statement in a recent Crisis Group report that ‘Pressing the Huthis to accept a political settlement in Yemen arguably is also a measure Iran can offer to help effect a broader regional and US-Iranian de-escalation’, can just as easily be reversed to say that such pressure is unlikely to be forthcoming without a conciliatory American gesture in the regional confrontation between Iran and the US. In fact, regardless of the precise nature and depth of Houthi–Iranian relations, the Saudi intervention in Yemen has already brought about what it sought to avoid: a consolidated and more capable Houthi ‘movement’ that is guaranteed to have a seat in any future Yemeni unity government, should it ever be possible to stitch one together. The misery that the Saudi intervention caused, on top of decades of autocracy and underdevelopment in Yemen, is sure to create instability on its southern border for a long time to come, making the kingdom vulnerable to foreign powers and radical armed groups (like Al-Qaeda in the Arabian Peninsula).
(5) Making a regional security platform more necessary, but less likely. After two years of sanctions, hostile rhetoric, loss of confidence and military tit-for-tat operations, it is hard to imagine a return in good faith to the original logic of the original nuclear deal. Its narrow design as an issue-specific compromise to establish a basis of confidence for further dialogue and negotiations is most probably history. In addition, the strategic security equation of the Middle East has become more complex and more entrenched. The increase in complexity arises largely from Turkey’s increasingly assertive posture in its neighbourhood (Syria, Kurdistan, Libya, Azerbaijan and the eastern Mediterranean), which poses a serious policy dilemma for the US. Greater entrenchment results from the new links between the UAE, Israel, the US and Bahrain on the one hand – they all view Iran as a major threat – and from the resilience of Iran’s regional footprint on the other. As a result, restoring the nuclear deal is no longer enough to bring about a positive cascade into other regional security issue areas. This means that even a revival of the nuclear deal under a Biden administration is likely to focus more on Iran’s regional posture. Tehran might accept this if its economic needs are dire enough to threaten the government’s hold on power. But to be sustainable, at a minimum a deal will also have to address the security profiles of Saudi Arabia and Israel, and perhaps those of Iraq, Turkey and the Emirates. This means that regional security can only be enhanced through a regional initiative. Yet, the crescendo of recent Iranian, US and allied political discourse, those countries’ altered threat perception and diminished confidence, and the increasing assertiveness of their posture means that such an initiative has become unlikely.
European effects are effects of US policy towards Iran on the EU/E3:
(6) Initiating a mindset change away from viewing the US as a reliable ally in most cases. While there was never full EU-US foreign policy alignment, and although high profile fall-outs have always occurred (such as the 2003 invasion of Iraq that France and Germany opposed), these were limited to the political-military sphere and generally resolved by agreeing to disagree. The case of the nuclear deal is much more profound as Washington basically coerced Europe’s private sector into compliance and leveraged its economic power over Europe’s governments. While these did not resist as much as they could have, neither have they enjoyed the experience. In consequence, the debate on the merits and longevity of the US-European alliance has been rekindled. For example, the Dutch government’s Advisory Council for International Affairs (notably chaired by a former NATO Secretary-General) recently recommended a greater focus on European defence efforts because American interest and action in conflicts relevant to Europe can no longer be taken for granted. While such ‘emancipatory debate’ is in its early stages, it was inconceivable under previous US administrations. In time, it may lead to efforts to increase Europe’s strategic autonomy in line with European Commission President Von der Leyen’s ambition of running a ‘geopolitical European Commission’.
(7) Losing global diplomatic credibility. While the EU/E3 scored a significant diplomatic victory in facilitating and negotiating the nuclear deal, its limited efforts to keep it alive after 2018 have reduced its credibility in the area of hard power politics and conflict resolution. Although the EU is an economic giant with its internal market of c. 450 million citizens, a strong trade policy and plenty of financial experience, it has not been able to mobilise these latent assets into a practical response to US sanctions on Iran that could safeguard its economic autonomy and maintain the JCPOA. At the same time, dents in the EU’s diplomatic reputation have been somewhat mitigated by growing negative perceptions across the Middle East, the US and Europe of the power plays of armed groups linked with Iran in places like Lebanon and Iraq, and the divisive effect they have on local governance and political reform.