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Iran Primer: Iran and the European Union

by WALTER POSCH

29 Oct 2010 18:30Comments

SakinehProtestParis.jpg[ primer ] For decades, the European Union's policy of engaging Tehran differed markedly from the U.S. policy of containing or isolating Iran. At the height of European engagement, EU foreign policy chief Javier Solana often acted as negotiator with Iran on behalf of the entire international community. The EU's main function in the nuclear crisis was accomplished when the United States expressed willingness to talk directly to Iran. But the more the Iranians stalled, the more the EU followed the U.S. lead and intensified sanctions against the Islamic Republic -- even when it ran counter to Europe's own economic and strategic interests in the region.

The Rafsanjani era: 1989-1997

After a decade of war and revolutionary turmoil, President Akbar Hashemi Rafsanjani began pushing Iran toward normalcy in both domestic and foreign policy when he was elected in 1989. Iran's new tone, combined with its geopolitical and economic importance, convinced the European Union -- as distinguished from individual member states -- to consider intensifying relations. In 1992, the European Council made the formal decision to reach out to Iran. A host of issues still caused serious tensions, including Ayatollah Ruhollah Khomeini's 1989 fatwa calling for the death of Salman Rushdie, author of The Satanic Verses. So the EU initiated a "critical dialogue," rather than try to establish formal ties through a Trade and Cooperation Agreement or a Political Dialogue Agreement -- as the EU would with other countries.

The "critical dialogue" reflected both components of the new EU policy: It was critical because the Europeans brought up the most worrisome issues with Iran -- its abysmal human rights record, support for terrorism, opposition to the Middle East peace process, and proliferation issues. But it was still a dialogue in which Europeans and Iranians talked and listened to each other.

The "critical dialogue" came under fire from many in Europe, the United States, and Israel. The main complaint was that the diplomatic dialogue was cheap cover for booming European business relations with the oil-rich Islamic Republic. Yet the "critical dialogue" did force the Iranians to look at human rights issues -- and admit that there was an issue at all. But over the next five years, EU-Iran relations deteriorated again. A 1997 German court's verdict against Iranian officials for involvement in terrorist activities was the turning point. Iran's unacceptable reaction to the verdict led to the pullout of all European ambassadors from Tehran. Relations seemed beyond repair, at least from the EU vantage point.

The reformist era: 1997-2002

The surprise election of President Mohammad Khatami in 1997 changed the Iranian political climate at home and with the outside world. His new reform agenda made reengagement possible. The EU decided to revamp the "critical dialogue" and launch a new "comprehensive dialogue." Within this format, EU and Iranian officials met twice a year at the level of under-secretary of state. The range of issues was enhanced; human rights and non-proliferation issues were put higher on the agenda.

After Khatami's 2001 reelection, the EU moved to further intensify the relationship. It pressed for significant positive steps on the thorniest issues between Iran and the outside world. During this period, EU-Iran relations flourished at all levels -- economic, social, academic, and cultural. Impressed by the serious debate inside Iran on democracy and human rights, many Europeans hoped that further engagement -- including Trade Cooperation and Political Dialogue Agreements -- would facilitate even more democratic openings in Iran.

But this second diplomatic effort also suffered a serious setback after revelations in 2002 that Iran had undeclared nuclear sites at Natanz and Arak. From then on, Iran's controversial nuclear program took priority over all other policy issues.

Nuclear issues: 2002-present

Iran became a critical diplomatic test case for the young EU after the 2003 U.S. invasion of Iraq. Given the disclosure of a secret Iranian nuclear program, European decision-makers could not rule out another unilateral U.S. military attack, this time on Iran. But many Europeans were concerned that American unilateralism might also weaken the system of controls and verification conducted by the Vienna-based International Atomic Energy Agency (IAEA). The EU felt pressure to use its contacts with both Iran and the United States to prevent another Middle East war, and also prove that it could act as a united, important and independent actor on the international stage. Combining these partially conflicting agendas was not easy in light of the often cumbersome and consensual EU decision-making processes.

In the autumn of 2003, the EU's "Big Three" -- Britain, France, and Germany -- launched an initiative to defuse the crisis created by Iran's secret nuclear program. The three foreign ministers travelled to Tehran to convince the regime to take three pivotal steps: suspend uranium enrichment, detail the full scope of its nuclear program and facilities and sign the Nuclear Non-Proliferation Treaty Additional Protocol, which provided for more intrusive IAEA inspections. The European Council's secretary general and foreign policy chief, Javier Solana, joined the negotiating team. The EU-3 finalized the Paris Agreement with Iran on Nov. 15, 2004. The Paris Agreement was a major turning point proving the effectiveness of joint EU diplomacy. The EU-3 initiative became the EU's main modus operandi for transatlantic diplomacy with the United States, as well as nuclear diplomacy with Iran.

For the Europeans, the Khatami presidency was a mixed blessing. He appeared to be willing to deal with the international community, but he also faced a growing backlash with each compromise. After Iran signed the Paris Agreement, the nuclear issue became the most divisive foreign policy issue among Tehran's many factions. Hardliners argued that the nuclear program was the key to Iran's technological progress as well as the symbol of its sovereignty and international standing. They accused the reformists of selling out Iranian national interests.

The diplomatic tide turned after Mahmoud Ahmadinejad won Iran's 2005 presidential election. Tehran effectively renounced the Paris Agreement. The new government instead announced plans to again enrich uranium, the most controversial step in its nuclear program. The rejection was not simply due to a new president. The regime also had a basic disagreement with the outside world on its rights under the Nuclear Non-Proliferation Treaty.

Diplomatic escalation

Ahmadinejad had an impact on relations with Europe in other ways. His inflammatory remarks on Israel and denial of the Holocaust, which are particularly sensitive issues in Europe, poisoned the diplomatic climate. They also destroyed the inroads achieved during the Khatami presidency. Iran's supreme leader ultimately makes key decisions. Yet there was a striking difference in tactics once Ahmadinejad was elected. During Khatami's presidency, Iran meticulously avoided actions on its nuclear program that would lead Iran to be referred to the U.N. Security Council. But Ahmadinejad proved a bold risk-taker.

In early 2006, Iran was referred to the U.N. Security Council because of its failure to provide information on its past covert nuclear program. The EU continued to take the lead in trying to convince Tehran to cooperate with the international community. Solana, the EU foreign policy chief, became the sole negotiator with the Iranians. In 2006 and in 2008, Solana presented offers for a negotiated solution that included several economic and diplomatic incentives, in both cases backed by the United States and the U.N. Security Council. Tehran rejected both packages, even though the price was a new round of sanctions.

In 2009, the EU and the United States jointly made a third offer to help Iran at talks in Geneva, the first time an American envoy was present. This time the deal introduced a two-step plan. The first phase would provide badly needed fuel for Iran's research reactor, which it used to produce isotopes for medical purposes, in exchange for Iran transferring some 80 percent of its enriched uranium abroad for reprocessing into fuel rods. The process would allow time for step two, which centered on talks about Iran's entire nuclear program. Tehran initially embraced the offer, but soon backed down under pressure from both conservatives and reformers at home.

Trade relations and sanctions

The post-war normalization under Rafsanjani created a relatively friendly business environment. European enterprises were ready to engage in what has been a promising market. The Europeans imported mainly oil from Iran and hoped to be able to invest in Iran's vast gas supplies. Iran, in turn, bought mostly machinery. Yet business relations with Iran faced many practical obstacles, including an overbearing bureaucracy, weak legal system and the absence of a European Trade and Cooperation Agreement. Business relations became more complicated under the Ahmadinejad government; international sanctions also had an impact. Between 2008 and 2009, EU exports to Iran declined by some 45 percent. In 2010, sanctions were expected to produce further declines.

EU exports to Iran in 2009:

* 18.4 billion Euros, down 45 percent compared to 2008
* Machinery and transport equipment -- 54 percent
* Manufactured goods -- 16.9 percent
* Chemicals -- 12.1 percent

EU imports from Iran in 2009:

* 10.3 billion Euros, fairly constant
* Energy and energy-related products -- 90 percent

Since 2006, Europe's Iran policy has increasingly been reduced to nuclear issues. Actions have in turn been increasingly focused on sanctions. Since the United States has long had a wide array of sanctions on Iran, the new U.N. resolutions have impacted Europe far more. But the one-issue focus has had two other negative effects: First, it prevents the EU from formulating a cohesive Iran strategy that would also factor in human rights, regional issues, and energy.

Second, sanctions ceased to be a tool because they became both the EU's strategy and policy on Iran. The array of sanctions imposed under four U.N. resolutions since 2006 have progressively moved toward a containment policy. For Europe, they are also effectively irreversible without U.S. consent. From that perspective, the EU has out-sanctioned itself from having any influence with Iran.

The future

* The EU is committed to getting Iran to negotiate in good faith, despite repeated setbacks and deteriorating bilateral relations.

* Iran's performance on human rights will be a key to EU actions. Further deterioration on rights issues could lead to additional EU travel bans against officials tied to abuses. The human rights issue could also increase the European parliament's role in shaping the European debate on Iran policy.

* EU actions on Turkey will be influenced by what Ankara does with Iran. Turkish-Iranian relations will be closely watched. And the question of whether Turkey acts European or drives "eastward" will become an increasingly crucial question for European decision makers and academia.

Walter Posch is a senior research fellow working on Iranian domestic, foreign, and security policy at the German International and Foreign Policy Institute in Berlin. This article is presented by Tehran Bureau, the U.S. Institute of Peace, and the Woodrow Wilson International Center for Scholars as part of the Iran project at iranprimer.usip.org.

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