How Europe Can Save What’s Left of the Iran Nuclear Deal

Since the United States withdrew from the 2015 Iran nuclear deal, the remaining parties have made a worthwhile effort to salvage it. Iran’s continued patience was met with more U.S. sanctions. Meanwhile, Iran has been unable to get an economic package from its counterparts in the deal that would offset U.S. sanctions. Tehran has responded in recent weeks by reducing its compliance with the deal by increasing the levels to which it is enriching uranium and has announced plans to lessen its commitments every 60 days.

All eyes are now on Europe. The question for officials in European capitals is how to calibrate their reactions in order to minimize the damage. Europe should work toward preventing the deal’s collapse, for as long as feasible. If Europe cannot deliver tangible measures to reverse Iran’s road map, it should attempt to freeze the nuclear escalation through an arrangement that locks in the current status quo, a “nuclear deal-lite,” for an extended period.

In grappling with these new realities, Europe has three main options. First, as French President Emmanuel Macron seems eager to advance, the remaining parties to the deal could enter a phase of shuttle diplomacy in advance of the U.N. General Assembly opening in September. The hope is that diplomats can come up with some creative solutions to persuade Tehran to reverse its noncompliance.

Any such steps would, however, require a higher degree of confrontation with the United States. So far, European leaders have been unwilling to take that risk, given the strategic interests at stake for an already difficult trans-Atlantic alliance. Moreover, European governments have been unable to provide a framework in which their companies can trade with Iran without fear of penalties or being cut off from the U.S. market as a result of American sanctions.

Absent a major push by Europe, China, and Russia to provide Iran with tangible economic breathing room, there is little to suggest Iran would change course on its noncompliance. As such, this first option can at best buy Europe a short cooling-off period.

A second option is for France, Britain, and Germany to unilaterally or collectively trigger the deal’s dispute resolution process in response to Iranian noncompliance. This would most likely be considered if Iran continues to renege on its commitments at the end of the current 60-day deadline. No party to the agreement has attempted this, but the process is expected to take a couple of months. Once the three European countries begin the formal dispute resolution path, the ultimate result is likely to be the reimposition of U.N. and EU sanctions, which would most likely lead to the deal’s complete collapse.

Given the existing impact of U.S. secondary sanctions, the economic hit for Iran from additional U.N. and EU sanctions would be limited and therefore unlikely to persuade the country to recommit to the deal. More worrying is the fact that Iranian officials have said that if these sanctions return, Tehran would withdraw from the Nuclear Nonproliferation Treaty.

This scenario carries risks for Europe, with few upsides. The deal’s collapse would significantly increase the danger of direct Israeli or U.S. military strikes against Iranian nuclear facilities. This could escalate to targeting military personnel or Iranian-backed forces operating in the region. To deter or respond to such aggression, Iran could mobilize its extensive ballistic missile program, disrupt freedom of navigation in the Persian Gulf, and use its network of nonstate proxies across the region to target U.S. and Israeli interests. This would all unfold on Europe’s doorstep, creating real security risks.

The third option is for Europe to work with China and Russia to formalize an interim arrangement before the deal falls apart. The goal would be to reach a political understanding that freezes Iranian noncompliance in return for realistic economic incentives. Such talks can take place under the existing umbrella of the Joint Commission established by the nuclear deal, with the objective that Iran eventually returns to full compliance.

British, French, German, and EU leaders have so far rejected this approach. It is also unclear if Tehran would accept it. As long as Iran was fully complying with the agreement, it would not have made strategic sense for European leaders to entertain this option. Nor was it logical to signal to Iran that Europe would accept a less-for-less deal when Iran had not yet come to that conclusion.

The goal posts have shifted, however, now that Iran has decided to partially cease its obligations under the nuclear deal. Given that shift, Europe needs a new framework for managing this problem. This third track offers the most pragmatic path for both sides to manage their standoff and prevent the worst-case scenario.

For Europe, while this route is far from ideal, it can stabilize the crisis over Iran’s nuclear program and reduce the associated risks of further military confrontation in the region. An interim deal would preserve the cornerstones of the original agreement, such as more critical caps on Iran’s uranium enrichment and centrifuge numbers—and crucially the heightened inspection mechanism that Iran is implementing.

The fact that the International Atomic Energy Agency was able to verify within hours that Iran had exceeded the deal’s limits on its enrichment levels and stockpiles reflects how effectively the deal works. In combination, such measures restrict Iran’s ability to expand its nuclear program and provide Europe with valuable intelligence through intrusive international monitoring. It will also make it more politically appealing for a future U.S. administration, perhaps after 2020, to rejoin diplomatic efforts with Iran if the deal’s main pillars have survived, rather than having to start from scratch with Tehran.

For Iran, this third path could provide the Hassan Rouhani administration with a face-saving way to navigate complex domestic politics and convince the country’s other power brokers that elements of the deal are worth preserving. Rouhani’s government has faced an extensive backlash from opposition factions, and indirectly from Iran’s supreme leader, for its perceived naivety in trusting the United States and giving away Iran’s upper hand on the nuclear program for nothing. Rouhani has faced similar pushback against efforts with Europe to salvage the nuclear deal over the past year.

The incremental approach through which Iran is currently managing its nuclear escalation suggests there is still a constituency inside the country that seeks to avoid the deal’s collapse. A nuclear deal-lite, through which Iran regains some leverage through its nuclear program and economic rewards, could provide Rouhani with more ammunition to suspend the current path to nuclear escalation.

This will be especially true if Europe, China, and Russia collectively step up the pressure on the Trump administration to ease some of the recent sanctions placed on the Iranian economy, such as those against the metals, oil, and petrochemical sectors. China and Europe could actively work toward helping Iran find buyers that will pre-purchase oil for future delivery (once the sanctions environment shifts) in order to prevent a shock to Tehran’s oil market share.

While Moscow and Beijing have been more sympathetic to Iran’s position on sanctions, they have also used the fallout as an opportunity to draw Iran into a closer dependency. It is likely that Iran will have to make considerable concessions for any continued Chinese investment and oil exports. Russia, too, can use Tehran’s growing isolation to its own advantage—both in the energy markets and in the context of their security cooperation in Syria.

However, Moscow and Beijing are likely to welcome openings to work more closely with Europeans in a multilateral setting to contain the damage through an interim arrangement. Such diplomatic efforts concerning Iran would also offer China and Russia a chance to push for progress with Europe in other areas of bilateral negotiations.

Another step that could persuade Tehran to agree to an interim deal is if an increasing number of transactions were facilitated through the special purpose vehicle for trade known as “Instex.” In the coming weeks, European countries should demonstrate that Instex is a credible mechanism by ensuring the first series of pilot transactions are successful and to coordinate a high-level political pushback if the United States attempts to impose sanctions against Instex or its Iranian mirror entity. This will strengthen the Europeans’ hand in convincing Iran that trade could expand over time if Tehran once again fully complies with the deal.

Finally, Europeans can stress that averting the return of U.N. sanctions, and maintaining communication channels with Europe, could have some strategic value for Tehran, such as providing Iran with cover in the international forums where the United States is attempting to exert greater pressure against it.

There is no guarantee that a nuclear deal-lite will ease tensions between Washington and Tehran. In recent weeks, hawks in the United States have rallied President Donald Trump to pursue surgical military strikes against Iran in response to the shooting down of a U.S. drone. So long as the United States seeks to throttle Iran’s economy, the two countries are likely to remain trapped in a cycle of tension. But an interim arrangement, preserving some aspects of the deal, could at least reduce the likelihood of a military confrontation.

The total collapse of the nuclear deal will have long-lasting implications for the EU’s security interests and credibility. The conversation over Iran policy therefore merits a wider and more serious EU debate in advance of the next Joint Commission meeting that has been urgently called on by the European parties to the agreement. As EU foreign ministers meet on Monday, there should be a frank discussion on how best to stabilize the current situation and provide a softer landing with Iran.