The Forum for Partners in Iran's Marketplace

January 2019, No. 90


We Should Not Be Pessimistic about Europe

At the moment, Europe is also a center of modern technology transfer, even in comparison with China and Japan.

On the sidelines of the UN General Assembly in September, a meeting between Iran and Group 4+1 was held, in which the EU unveiled a new approach for cooperation with Iran. The mechanism used to dismantle US sanctions and pressure. In order to examine how this mechanism was used, we conducted an interview with an experienced EU foreign relations expert. Mehrdad Emadi, an economic expert, sees this as a unique opportunity to improve Iranís foreign trade relations and believes that Iran should make the most of the proposal to create a payment system. Referring to the positive and negative points of this package, he said that, ultimately, this EU approach should not be viewed as a permanent solution, but should be seen as an opportunity to diversify foreign relations. He believes that, given the key features of this idea, the Treasury Department will have a hard time imposing its economic pressure on Iran. 

How do you think Iran can benefit from Europe in serving its interests?

Certainly, this is a unique opportunity, and if the United States had remained within the framework of this international agreement, it would have become a golden and incredible opportunity. In fact, the American law aversion and turning its back to all the international multilateral protocols prevented the fruits of the Joint Comprehensive Plan of Action (JCPOA) be fully used by Iran.

In such a situation, Iran should use weights (although they do not count on the US weight, but maybe in total would weigh the equivalent of that country or even more) in order to not only reduce the US pressures (pressures on the Iranian economy in an unprecedented way since 1982), but also in some aspects turn these pressures into opportunities.

In this regard, and given the challenges that have emerged in US relations with its two main trading partners (the EU and China), Iran seems to be able to use the two, which if combined have an economy larger than the US. The importance of the EU becomes known when its new proposal concerning special payment system, based on which the money will not be directly given to anyone and will be in credit line, can be beneficial to Iran because this system will be in euro. Without doubt, in the next decade, when yuan becomes a global currency, China can also become a major trading partner for Iran.

At the moment, Europe is also a center of modern technology transfer, even in comparison with China and Japan. Countries such as Germany, Sweden, Denmark, Italy, France and the United Kingdom each have a lot of ideas due to their 250-year academic infrastructures and the strong interaction between the academic system and the engineering industry, which is very important for Iran, because Iran is now in the second stage of industrialization (Iran has emerged from neo-industrialization stage and has a developed industry), but it needs urgent updating of its industries. 

How does the specific approach the Europeans have created, and how likely would it succeed?

In this context, the special payment system is actually the first step. It was supposed to be a system in the first stage for Europe to buy energy from Iran and transfer money to Iran, but in the second phase, it became a long-standing institution for cooperation and coordination between the EU and Iran. This has two positive points and two negative points. Since money is not paid directly to state-owned companies (such as the National Iranian Oil Company or the National Iranian Gas Company), and in fact there is no bank to receive and transfer money as go-between, it would be difficult for the US Treasury to insist on it and fulfill its threats. Because there will be no real or legal entity for punishment. Even if the United States blocks SWIFT (which will not be possible at least in the short term), there will not be any effect on this system. Another positive point is that the system will be under pressure from Tel Aviv and Riyadh lobbyists. Of course, Dubai too must be added to the list as the UAE has recently publicly voiced opposition to Iran in a London forum.

Of course, in the short term, two important points should be noted. The first point is that Iran will not directly receive money that can be used outside of the EU, but this cannot be very worrying because Europe is very diverse, and Iran can meet many of its needs. That EU will fix it. The second limitation is for this system to become permanent. 

How will the EU's proposed mechanism be safe from new US sanctions?

Looking at the new American economic threats, we see that the US Treasury now says directly to companies like Siemens or Deutsche Bank not to interact with Iran. Another treasury tactic is sending missions to ministries of different countries asking them to put Iran under pressure. Of course, given the arrangements made by the EU, backed strongly by the three top powers (France, Germany, and the UK), US tactics are unlikely to bear fruit. Indeed, the EUís administrative system has emphasized that the US Treasuryís conduct and threats were firstly illegal, secondly, a violation of the agreement signed by Washington itself, and thirdly, it is contrary to the EUís security considerations to pressure Iran.

I think that for this reason, the voice of American threats will be louder in the second half of November and December, but given the fact that it is working weekly on the special payments system, not only will this system be fully deployed, but also after the completion of the countriesí cadres in this field and their inclusion, this system will have a great performance. 

Has this been an integrated EU decision, or have there been divisions within the EU regarding the strengthening of relations with Iran?

Yes, there always have been differences of opinion on this issue in the union. Fortunately, the EU key and first-rate countries all agree on supporting Iran. In general, EU countries can be divided into three categories. The first category is dedicated to three top European economies, namely Germany, France and the UK. Among second-rank countries that are important but do not have a key role mention can be made of Spain, Austria and Italy. The third-rank countries are the Commonwealth of the Independent States (former Soviet Union) and countries such as Greece and Portugal.

 Undoubtedly, the first-class countries all emphasize on keeping the JCPOA. Even France, which sometimes has close ties with Saudi Arabia and Tel Aviv, has often been supporting Iran. But countries such as Spain, Hungary and Poland are very close to the US in political decision making.

However, there is such a division, but as long as these key states which offset the deficiency payment of other countries are backing Iran, there is no need to be concerned about the EU position. In the meantime, there is no harm to upgrading Iranís relations with countries like Spain and Hungary in the near future. 

Given the apparent EU resolve to seriously consider fostering relations with Iran and preserving the JCPOA without the US, what tools can Iran use to consolidate its long-term relationship with Europe?

In my opinion, the most positive and effective instrument will be the formation of economic consortia in special projects. For example, Iran railways reconstruction project, which I personally wished we could agree with Germany and France, to triple the length and the capacity of the railway in 10 years. Because the railway is economically important both for transportation and for strategic purposes for Iran, and with its expansion, the expense of transporting goods internally can be much more cost effective.

Other projects include Iranís petrochemicals and turning it into three poles of chemical products related to pharmaceuticals with high added value; products related to the construction center; and products related to plastic goods, which is currently being implemented in China. I believe China could be a good model for Iran. Basically, these disparities are one of the chronic diseases in our economy.

As for automotive industry, it can be completely transformed by establishing a consortium with European countries and companies like Spainís SEAT and Germanyís Volkswagen and Audi. This is what Japan did with the British and then with the Americans, and today we see Japan automobile industry has become one of the worldís most important poles. Indeed, given the experience of various countries, I can say that this issue can be Iranís most important means of deepening and consolidating long-term relations with the EU and removing these relations from the underlying economic threat of the US and any other country in the future. 

How will relations between Iran and EU be affected if FATF gets final approval?

One of the legal obstacles in Iran-EU relations is that FATF is still not standardized in the country. In my opinion, this was one of the procrastinations whose importance was ignored under internal pressure. But it seems that the importance of this issue has now been accepted inside the country. I have always believed that this transparency is very good for the Iranian economy. As there is transparency in the US Congress concerning US spending in Afghanistan, Iraq, and Syria. 

What is the role of countries like China and India in international relations of Iran?

In my opinion, these two countries together can play a key role in Iranís foreign trade relations in the long run. Of course, after Europeís supply needs in the next 10 years, I suppose that the gravity of our economic and regional security will be in relation to China and India, not in relation to Europe and Russia.

However, historically, diplomatic relations between Iran and India have always been good, and there is deep-seated friendship between the two countries. It seems that India not only can strengthen Iranís foothold in West Asia, but can help Iran in technical, software and defense industries. As for China, the parameters will be very different from India but China is expected to become the worldís largest economy in the next five years, and this shows the importance of a relationship with China more than before.


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  January 2019
No. 90