Iran under threat: US and EU on a collision course

Iranian MPs burn US flag

When US President Trump announced on 8 May 2018 that the US was leaving the nuclear deal agreed in 2015 with Iran, he not only increased the likelihood of a military clash between the US and Iran, he threw down the gauntlet in a challenge to Europe. The US government rejected appeals from the German Chancellor, the French President and British Foreign Secretary to stick with the deal. The German, French and British ruling classes must now decide whether to confront their US counterpart or submit to it. TREVOR RAYNE reports.

Within hours of Trump’s statement, Syrian state media accused Israel of launching a missile attack on an army base south of Damascus, believed to be used by Iranian forces. The Financial Times ran an editorial: ‘The march to another Middle East disaster’ (14 May 2018). ‘For the people of the Middle East, imperialism has brought a century of disaster. Control over the Middle East and its energy resources have been crucial to global imperialist power. Now, Iran and Russia, with Syria, are seen by imperialism as threatening that control. China is also increasing its economic influence in the Middle East. The US ruling class is drawn to use its military superiority to assert its power. Within eight years the Chinese economy is forecast to overtake the US economy in size, China already produces more manufactured goods than the US. The US may decide that it must use its military superiority before that superiority is diminished.       

The 2015 Joint Comprehensive Plan of Action (nuclear deal) was intended to curb Iranian nuclear enrichment and prevent Iran developing nuclear weapons. Iran said that it had no intention of making nuclear weapons. On ten occasions the International Atomic Energy Agency has verified that Iran has complied with the deal. The US Director of National Intelligence, the former US Secretary of State and the US Defence Secretary, all said that Iran was complying with the deal. However, President Trump declared: ‘The US will withdraw from the Iran nuclear deal. If I allowed this deal to stand, there would soon be a nuclear arms race in the Middle East.’ The only Middle Eastern state that possesses nuclear weapons is Israel, although it does not admit to them, nor will Israel sign the Nuclear Non-Proliferation Treaty, which Iran has signed. Israel and Saudi Arabia both opposed the 2015 nuclear deal and support the US decision to withdraw from it. For Israel and Saudi Arabia, any agreement between the US and Iran reduces their strategic importance as allies of imperialism. Saudi Arabia views Iran as a competitor for influence in the Persian Gulf and across the Middle East.

The US says it wants a new deal that curbs Iran’s ballistic missile programme, ends Iran’s roles in Syria and Iraq and backing for the Houthis in Yemen, ends support for what the US calls terrorists, including Hezbollah in Lebanon and Hamas in Palestine, and further restricts Iran’s nuclear power industry; this amounts to surrender to the US and threatens regime change. The Iranian government says it will not abide by any part of the 2015 nuclear deal if it does not get any economic benefits from doing so.

The European Union’s response

US economic sanctions on trade with Iran are scheduled to be enforced in three and six months’ time. They will have extra-territorial reach, beyond the US and Iran. The US ambassador to Germany tweeted: ‘German companies doing business in Iran should wind down operations immediately.’ For US sanctions to be effective, European countries and companies will also have to enforce them. US sanctions on Iran will be imposed on third parties, namely European and Asian countries and companies. The US targeting of Iran has drawn it into a potential conflict with the European Union. Europe’s ruling classes cannot forever remain subordinate to the US ruling class. Their own ambitions and need for outlets for profitable investments will drive them into confrontation with the US. The question is: when will they make a stand? France’s finance minister, Bruno Le Maire, responded to the US decision: ‘Do we want to be the vassals of the United States, who obediently doff the hat?’ The British government said that the US decision was a cause for ‘regret and concern’. The US will reckon it can divide the different European national governments and some of these from the EU, in imposing sanctions on Iran. In 2003, when France and Germany opposed the US-led attack on Iraq, the British Labour government won 18 EU member states to support the war.       

US unilateralism has seen it pull out of the Paris accord on climate change, withdraw from the Trans-Pacific Partnership deal, threaten trade war with China and threaten to impose tariffs on European and Asian steel and aluminium; the US has relocated its embassy to Jerusalem, in defiance of international opposition, and now it has withdrawn from the Iran deal. Britain, France and Germany have said that they will continue to work to invest in Iran’s oil industry. European Commission President, Jean-Claude Juncker, said that the US was turning its back on multilateral relations and cooperation ‘with a ferocity that can only surprise us… [the US] no longer wants to cooperate with other parts of the world’. France’s finance minister concluded: ‘The international reach of US sanctions makes the US the economic policeman of the planet and that is not acceptable.’      

Germany has indicated that it may challenge US threats. The US opposes the Nord Stream 2 project to bring gas from Russia to Germany, under the Baltic Sea, avoiding Ukraine, Poland and the Baltic states. The US said that the project would undermine Europe’s energy stability and security. The US State Department warned that companies financing and constructing the gas pipeline ‘could expose themselves to sanctions’ under US law. President Trump condemned Germany for ‘buying massive amounts of gas from Russia’. On 3 May 2018, construction work began on the German section of the pipeline.

European companies face substantial penalties if they invest in and trade with Iran. In 2015 US courts fined French bank BNP Paribas $9bn for violating sanctions against Iran, Cuba and Sudan. The US economy may be relatively in decline but its banking and finance still permeates international capitalism: ‘It is the dollar, as much as American military might, that allows the US to coerce its allies – as well as its adversaries,’ (Financial Times 12/13 May 2018). The US dollar accounts for 44% of the world’s $5trillion daily turnover in foreign exchange, compared to the euro’s 13% and China’s renminbi’s 2%. The US is the world’s leading supplier of bonds (forms of lending to companies and governments) accounting for 43% of the $90 trillion worth outstanding globally in 2016, compared with 12% supplied by China and other emerging market economies together. It is the world’s leading supplier of equities (ownership of company shares) with 39% of the $70 trillion worth of global equity stock outstanding in 2016, (Financial Times 21 May 2018).

The US will demand that the Belgium-based SWIFT financial messaging service, that facilitates cross-border payments, cuts off the Iranian banking system, as it did between 2012 and February 2016. SWIFT connects over 11,000 financial institutions in over 200 countries, and it handles about $5trillion of transactions per day. SWIFT has said that it will do what it is told to do by the EU. Any bank doing business with Iran would be blocked from maintaining an account in the US. Russia and China have discussed setting up an alternative payments system, bypassing the dollar. The EU may now consider joining this effort, particularly if it boosts the role of the euro.

European multinational corporations are unlikely to risk losing access to the US market. EU trade with Iran is less than 1% of total EU external trade. However, since 2014 EU exports to Iran have grown by 70%. Europe’s Airbus has orders worth $20bn to supply aircraft to Iran, but Airbus uses US-made components and so this deal will probably be cancelled. In January 2018, the Iranian car manufacturer Khodro signed an agreement with Daimler to produce Mercedes-Benz in Iran. Renault signed a $780m deal with Iran in 2017 and has a target of producing 300,000 cars there by 2023.

Iran’s crude oil exports have risen by about two thirds since the 2015 nuclear deal. The country has the world’s second-biggest gas reserves and fourth-largest oil reserves. The Iranian government said it needed $200bn of investment in its energy industry in the next five years. This is a great attraction to the energy multinationals.  Royal Dutch Shell has a contract to invest in Iran’s energy. However, the biggest European investor in Iran is the French oil multinational Total, with a $4.8bn contract to develop South Pars, the world’s biggest gas field. Total has threatened to pull out if it is not protected from sanctions. Over 90% of Total’s financing operations involve US banks. If Total withdraws, it could spell the end of attempts to keep the 2015 nuclear deal in operation. China’s state controlled CNPC, which has a 30% stake in the South Pars project, would take over Total’s role.

The EU is making arrangements to resist US pressure. The European Commission said that EU member states would be able to make direct payments for oil to Iran’s central bank and that it would revive a ‘blocking statute’, introduced in 1996 in response to US sanctions on Cuba, Iran and Libya, that stops EU countries’ courts enforcing US sanctions and allows companies to counter-sue when their interests have been damaged. If enforced, this would provoke conflict between the EU and the US.

China in the wings

China’s Great Wall Motors, whose vehicles are produced under licence in Iran, said there was ‘no reason for us to comply with US unilateral sanctions’. China is funding investment in Iran’s infrastructure. China’s state-owned investment company, CITIC Group established a $10bn credit line to Iran and the China Development Bank is considering $15bn more. China accounts for nearly 30% of Iran’s oil exports. Russia is considering investing up to $50bn in Iran. If European companies pull out of Iran under US threats, China and Russia may seize their opportunity to benefit, exacerbating tensions with the US. Iran has observer status with the China and Russia-led Shanghai Cooperation Organisation, a Eurasian security, political and economic body, established in 2003.  In 2016, Chinese President Xi Jinping announced his support for Iran becoming a full member.

Recent US attempts to punish the Chinese telecommunications company ZTE indicate the problems that lie ahead for the US in imposing sanctions on Europe. ZTE is China’s biggest telecommunications company, and ZTE handsets are the fourth most popular in the US. This April, the US placed a seven-year ban on supplying components to ZTE after it was accused of violating sanctions by selling technology to North Korea and Iran. US hardware companies became alarmed that China would retaliate against them if ZTE was not given a reprieve; they need access to China to remain globally competitive. President Trump backed down and announced that the US was negotiating a broader trade deal with China, including lifting sanctions on ZTE. Senior US Republican and Democrats are trying to block any such agreement.                         

What will the US do if Europe and China keep the Iran nuclear deal alive? What will it do if Iran resumes uranium enrichment? Will EU nations prevent the US from using its bases in them to attack Iran? Iran is adjacent to the Strait of Hormuz, through which passes 30% of the world’s seaborne-traded crude oil. If that Strait is cut, oil prices will sky rocket. Imperialism is on the brink of launching a trade war and it is igniting war after war. We must organise and resist it, before it is too late.     

 

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