Europe-Iran Relations One Year after the Sanctions were Lifted
INSS Insight No. 888, January 16, 2017
Sima Shine, Anna Catran
http://www.inss.org.il/index.aspx?id=4538&articleid=12809

SUMMARY: In the year since the nuclear agreement with Iran was implemented
and Europe lifted the sanctions, there has been much momentum and activity
regarding the resumption of contacts and signed agreements between European
countries and Iran. Relations with Europe are exceedingly important to the
regime in Tehran, both with regard to Europe as a source of
economic-commercial benefits and as a counterweight to the United States.
Iran’s relationship with Europe is especially significant upon the eve of
Trump’s entry into the White House, and given Trump’s statements about the
possibility of either renegotiating the nuclear agreement or scrapping it
altogether. The position of the European countries within the P5+1 is
important for the continuity of the JCPOA. And indeed, during their last
meeting, the European foreign ministers reiterated their support of the
continued implementation of the JCPOA and of the development of economic
relations with Iran, while clarifying that they will not support
cancellation of the agreement. If Trump indeed seeks to cancel or even
adjust the agreement, Europe’s opposition will be of decisive importance,
and will enable Iran to oppose new US demands, based on solid relations with
Europe.

In the year since the nuclear agreement (JCPOA) with Iran was implemented
and Europe lifted the sanctions, there has been much momentum and activity
regarding the resumption of contacts and signed agreements between European
countries and Iran. Since the removal of the sanctions, over 200 European
trade delegations have visited in Iran. Some of these contacts have already
matured into economic transactions, reflecting a 43 percent rise in EU-Iran
trade during the first half of the year over the corresponding period in
2015 when the sanctions were still in effect. In parallel, on October 25,
2016, the European parliament has approved a strategy toward Iran in the era
of the JCPOA and following the removal of the sanctions.

Iranian President Hassan Rouhani (l) and French President Francois Hollande
during a contracts and economic agreements signing ceremony in Paris,
January 28, 2016. Photo: Stephane de Sakutin / AFP
Immediately after the signing of the nuclear agreement in the summer of
2015, and even before the sanctions were lifted, delegations of European
senior officials and businessmen began visiting Iran with the aim of laying
the groundwork for investments and economic cooperation. Iranian President
Hassan Rouhani made a tour of European capitals, the first visit of its kind
in years, in which framework agreements for bilateral trade and economic
cooperation were signed. Among the deals concluded since then: Iran
purchased some 100 Airbus aircraft from France, after the United States
withdrew its objections to this transaction (the first plane arrived in Iran
on January 12, 2017); the French automobile companies, Peugeot and Renault,
returned their operations to Iran; the French oil company, Total, resumed
operations in Iran this past November after a six-year halt, within the
scope of an agreement to proceed with additional development in the South
Pars gas field in conjunction with a Chinese company – a transaction that is
valued at $6 billion; energy deals were signed with Italy; and the German
company Siemens signed an agreement to upgrade Iran’s railway infrastructure
(Germany was formerly Iran’s largest trade partner). Also on the agenda is
the resumption of activities in Iran by the British insurance company
Lloyds, after a five-year hiatus. This is an important development that was
even mentioned by President Rouhani, due to its contribution to lowering
Iranian export costs, as Iran had been forced to absorb high costs in recent
years because insurance companies, headed by Lloyds, refused to insure
Iranian cargos. Alongside these business developments is Iran’s reconnection
to the Swift global payments system, and thirty Iranian banks have already
connected to the system. The return of small European banks to Iran has also
contributed to the impressive improvement in Iran’s economic indices
recorded this past year.

Likewise evident were a number of important developments on the political
level, and these helped Iran to depict its release from political isolation
as one of the achievements of the nuclear agreement. Prominent among them is
the renewal of relations with Great Britain some four years after these
relations were severed, which occurred in part because of the storming of
the British embassy in Tehran by Iranian protestors and their attempt to
occupy it. Concurrently, after prolonged discussions and intense Iranian
lobbying efforts, the European parliament accepted the EU’s strategy for
relations with Iran. This includes support for expanded economic cooperative
efforts and investments and trade between European countries and Iran. In
addition, the strategy supports Iran’s joining the World Trade Organization
(WTO): the Iranian economy is the largest in the world outside the WTO; the
European Union was formerly Iran’s largest trade partner; and the volume of
trade, which currently reaches $8 billion, is expected to grow fourfold
within the next two years. On the other hand, the report on the EU strategy
does not disregard the serious human rights infractions in Iran, and states
that the lack of freedom of expression on the internet, the systemic
monitoring of internet traffic, and the lack of digital freedoms constitute
human rights violations and therefore pose an obstacle to enhancing trade
relations.

Another issue highlighted in the European Union’s strategy pertains to death
penalty sentences and executions in Iran, the country with the highest level
of death penalty executions per capita in the world. According to Amnesty
reports, in 2015 Iran executed 977 people, including juveniles, most
convicted for drug-related offenses. The EU strategy prescribes that given
Europe’s opposition to the death penalty, this issue is high on the European
human rights policy and foreign policy agenda. The EU strategy emphasizes
that capital punishment will be raised in the political dialogue and calls
on Iran to declare an immediate moratorium on the death penalty sentences
already handed down, and on the Iranian parliament to reconsider the section
in its penal code that allows the sentencing to death of children under the
age of 18. Furthermore, the European Union requests that Iran amend its
legislation that allows the judiciary to impose the death penalty on people
convicted of drug related offenses, as this would decrease the number of
executions dramatically.

Discussing the death penalty in Iran is taboo, and therefore few debate it
publicly. The majority of the executions occur inside prisons, although the
regime has carried out some executions in city squares as a deterrent
tactic. The Iranian constitution obligates the country to define explicitly
the crimes punishable by death, and all types of drug-related offenses have
been defined as such. Specifically, the death penalty for the use or sale of
drugs is anchored in the Iranian civil anti-drug legislation. This issue has
triggered a debate between the executive authority under the Rouhani
government, and the judicial authority, whose chairman is known for his
extremist views. The Supreme Leader, Khamenei, declared that the European
Union has no authority to decide what happens in Iran, and conservatives
also accused the EU of interfering in Iran’s internal affairs. Nevertheless,
an Iranian MP reported recently that a resolution was passed to commute the
sentences of five thousand people sentenced to various types of punishment.
According to the press release on the conclusions of the European Foreign
Affairs Council of November 14, 2016, the issue of human rights violations
and executions in Iran will remain a top priority on the EU agenda.

Against this backdrop, a debate is underway in Iran regarding the EU’s
desire to open a pseudo embassy in Iran. At this stage, a small
representative office operates out of the German embassy, and there is no
Iranian approval to open an embassy. Similar to most other foreign policy
topics in Iran, the issue of the relations with the European Union has
become a sensitive topic subject to internal political disagreements and a
tool for conservatives, concerned that having an independent EU embassy
would serve as a magnet for Iranian human rights activists, to condemn
Rouhani and his government. According to the head of the judicial authority,
Sadeq Larijani, an EU embassy would constitute a “nest of corruption,” and
he will not allow it. At the same time, the European Union is proposing that
Iran join its research programs within the framework of the Horizon 2020
Project, as well as student exchange programs, stressing the fact that more
than 60 percent of the Iranian population are below the age of 30. These
topics are also perceived as sensitive issues in Iran, due to the regime’s
tight control over educational programs in universities and its concern
about political activism among students, including during the annual student
day events, which are platforms for criticism of the regime.

Relations with Europe are exceedingly important to the regime in Tehran,
both with regard to Europe as a source of economic-commercial benefits and
as a counterweight to the United States, which is perceived as antagonistic
toward the regime. Iran’s relationship with Europe is especially important
upon the eve of Trump’s entry into the White House, and given Trump’s
statements about the possibility of either renegotiating the nuclear
agreement or scrapping it altogether. The position of the European countries
within the P5+1 is important to ensure the continuity of the JCPOA. And
indeed, during their last meeting, the European foreign ministers reiterated
their support of the continued implementation of the nuclear agreement and
of the development of economic relations with Iran, while clarifying that
they will not support cancellation of the agreement. Furthermore, if Trump
indeed seeks to cancel or even adjust the agreement, Europe’s opposition
will be of decisive importance, and will enable Iran to oppose new US
demands, based on solid relations with Europe.