Iran Pulse No. 91
No. 91 No. 91 March 24, 2019
France's Iran Policy Indicates INSTEX will Not Undermine Sanctions
The U.S. re-imposition of sanctions against Iran on November 4, 2018 prompted vociferous official protests from its European allies, particularly France, Germany, and the United Kingdom who remain signatories to the Iran Nuclear Deal. Among these so-called E-3 nations, France positioned itself as the leader of the European opposition to the new American posture toward Iran. Despite the initial defiant tone from Paris and its advocacy for an alternative financial mechanism to evade sanctions, France has not acted to undermine the American objective of bringing economic pressure to bear on Tehran by limiting the revenue earning capacity of Iran's oil and natural gas industries. France’s actions indicate that the E-3’s implementation of the INSTEX alternative trade channel to Iran will, likewise, not be used to thwart U.S. policy toward Iran, at least not at the outset.
The re-imposition of sanctions resulted from U.S. President Donald Trump’s May 8, 2018 withdrawal from the Iran Nuclear Deal. Formally known as the Joint Comprehensive Plan of Action (JCPOA), the 2015 agreement between Iran and the P5+1 nations (the permanent members of the United Nations Security Council plus Germany) exchanged a reduction in international sanctions on Iran for Tehran limiting its nuclear development program. The Trump administration’s renewed sanctions target Iran’s petroleum and shipping industries and place limits on financial transactions with the objective to cripple the country’s oil and natural gas exports.
Among the E-3 nations, France’s response was the most openly adversarial. "Europe refuses to allow the U.S. to be the trade policeman of the world," declared France’s Minister of Economy and Finance Bruno Le Maire in response to the new sanctions regime. Vowing to protect the European Union's "economic sovereignty," Le Maire threatened to make the EU's currency, the Euro, as strong as the dollar starting with the creation of a Special Purpose Vehicle, an alternative trade channel to the SWIFT system that would be immune to U.S. scrutiny.
Despite the strident tone from the French government, French firms have been forced to comply with the new U.S. sanctions against Iran’s energy sector, since Washington refused to grant France a sanctions compliance waiver as it had given to eight other nations. As a result, France’s largest energy company, Total, was forced to withdraw from a $4.8 billion development project in Iran’s massive South Pars natural gas field. Total is highly vulnerable to punitive action under the U.S. sanctions as 90 percent of its financing operations involve U.S. banks and the company maintains $10 billion in capital in U.S. assets. Total, Europe's largest refiner did not seek a waiver to continue crude oil purchases from Iran and France's Iranian oil imports had already ceased in September 2018 anticipating the new sanctions. While France constituted only 6.3 percent of Iran's 2017 export market, the loss of French purchases will represent $2-3 billion annual revenue shortfall for Iran, if the Islamic Republic cannot find an alternative buyer under the new sanctions regime.
French car manufacturers in Iran have also suspended their operations. Following the initial defiant tone emanating from Paris, Renault's then CEO Carlos Ghosn vowed in June 2018 to defy U.S. sanctions and maintain its operations in Iran. One month later, Renault reversed its decision, following its French rival PSA Group, manufacturer of Peugeot and Citroen, that had already suspended its operations in Iran.
In light of these emerging realities the run-up to the new sanctions regime, French President Emmanuel Macron struck a more conciliatory tone about the re-imposition of sanctions on Iran. During his September 2018 address to the United Nations, Macron suggested that the American economic pressure on Iran combined with the continued EU engagement with Iran would serve to limit Tehran's military capabilities while preserving the power of the reformist elements in the Iranian government. Speaking with reporters, the more circumspect Macron explained, “Perhaps because we’re able to keep this multilateral framework [the JCPOA], avoid the worst and act as a mediator, while the U.S. sanctions create pressure and reduce the amount of money available for Iran’s expansionism, that can accelerate the process we want.”
France’s attitude has also been moderated by the discovery of Iranian covert operations on French soil. On October 2, 2018, France publicly accused Iran of being behind the failed plot to bomb a June 30, 2010 rally near Paris organized the exiled opposition group, the National Council of Iran. The Macron government eventually expelled an Iranian diplomat allegedly linked to the plot.
In addition, France has also looked askance upon Iran’s efforts to enhance its long- range missile capability. Condemning a failed Iranian satellite launch that allegedly employed technology applicable to ballistic missiles, Paris threatened Tehran with sanctions if it does not reign in its missile development program. Declaring on January 16, 2018 that “The Iranian ballistic program is a source of concern for the international community and France." The French foreign ministry issued a formal appeal to Iran to cease its testing: “We call on Iran not to proceed with new ballistic missile tests designed to be able to carry nuclear weapons, including space launchers, and urge Iran to respect its obligations under all U.N. Security Council resolutions.”
The United Nations Security Council's Resolution 2331 formally enshrines the terms of the JCPOA that includes a call upon Iran to refrain for eight years from developing ballistic missiles capable of delivering nuclear weapons. In a response to criticism from France and other Western nations over the satellite launch, Iran’s then Foreign Ministry Spokesperson Bahram Qassemi claimed, “Such (space) capabilities have civilian nature and are by no means in violation of any of the international regulations in this area.”
France's exhortation came a week after talks in Tehran between Iranian diplomats and envoys from the E-3 nations as well as from Denmark, the Netherlands, and Belgium resulted in the Iranian side storming out of the meeting. In response, the EU imposed their first sanctions on Iran since 2015. Although largely symbolic, the measure was designed send a clear signal to Tehran about EU member states' concerns over both the missile program and Iranian operations on European soil. On January 25, French Foreign Minister Jean-Yves Le Drian, a prominent advocate for an alternative EU-Iran trade channel, threatened Tehran with sanctions that are more significant if the negotiations on Iran's ballistic missile program makes no progress. In response to Le Drian's remarks, Qassemi firmly stated, “Iran’s missile capability is not negotiable, and this has been brought to the attention of the French side during the ongoing political dialogue between Iran and France.”
Iran apparently was able mollify Paris' concerns, aided by Iran's Deputy Foreign Minister Seyed Abbas Araghchi’s February 4, 2018 meeting with the Secretary-General of France’s Ministry of Foreign Affairs Maurice Gourdault-Montagne. The February meeting in Paris was the first of the two biannual ministerial-level meetings established to improve
Dr. Micha’el Tanchum is a Fellow at the Truman Research Institute for the Advancement of Peace, Hebrew University and an affiliated scholar with the Centre for Strategic Studies at Başkent University in Ankara, Turkey (Başkent-SAM). Follow @michaeltanchum.
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Iran Pulse No. 91 ● March 24, 2019
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