Over to you, Europe. That was the sense in Iran yesterday (May 9) as the Iranians took stock of Donald Trump’s pullout from the nuclear deal and the insistence of the EU’s big guns that the agreement is holed but not sunk. London, Paris and Berlin are talking the talk. But when push comes to shove, will they deliver enough guaranteed benefits to Tehran to make the accord worth keeping? Will they have the nerve to defy Trump by protecting European banks and companies that remain engaged with the Islamic Republic from Washington’s renewed heavy sanctions? And perhaps even threaten counter-sanctions against American entities if it comes down to it?

By yesterday evening, the European Union was scrambling to arrange a crisis meeting with Iran, vowing to take steps that would immunise firms from any US sanctions. The day had brought little encouragement from the Iranians that they trusted the UK, France and Germany enough to deliver a salvageable Joint Comprehensive Plan of Action (the formal name of the nuclear deal, taking the acronym JCPOA).

Iran’s centrist-pragmatic President Hassan Rouhani said Europe had a “very limited opportunity” to save the deal, while Iran’s Supreme Leader Ayatollah Ali Khamenei—in a scornful address directed at Trump during which he exclaimed “Like hell, you will” in a retort aimed at the threats sent Iran's way by the US president—remarked that he was extremely dubious as to whether Iran should place any faith in Europe’s Big Three to come through for it. “If you can’t get a definite guarantee [on what they are offering], then the nuclear deal cannot be continued,” he said.

Expanding on Rouhani’s standpoint when it comes to preserving the deal without US participation—apart from Iran, the other signatories are Europe’s three major powers, Russia and China—the Iranian Students’ News Agency quoted Rouhani as telling French President Emmanuel Macron in a phone call: “Under the current conditions, Europe has a very limited opportunity to preserve the nuclear deal, and must, as quickly as possible, clarify its position and specify and announce its intentions with regard to its obligations.”

Aiming to reassure Iran that backing Europe’s JCPOA rescue efforts would not be in vain, Macron responded to Rouhani that he was willing “to continue enforcing the Iran nuclear agreement in all respects”, the Elysée said in a statement. Macron had “underlined the importance that Iran do the same”, it added.

“The deal is not dead”
French Foreign Minister Jean-Yves Le Drian backed those points up, telling RTL radio: “The deal is not dead. There is an American withdrawal from the deal but the deal is still there.”

In the UK, Foreign Secretary Boris Johnson vowed the UK would not abandon the nuclear deal and challenged Trump, who described the JCPOA as “defective to its core”, to come up with a better way to keep Iran’s nuclear development programme in check. European diplomats have given briefings in which they have outlined how they fear Washington has no plan in preparation on how to contain Iran in the Middle East, apart from applying such intense economic pressure that a popular uprising leads to regime change.

As things stand, Trump’s move has left Rouhani exposed to hardliners who say Iran should never have trusted the West to stick to an agreement such as the JCPOA. Mohammad Ali Jafari, commander of Iran's powerful Islamic Revolutionary Guard Corps (IRGC), on May 8 "congratulated" the nation on the "vicious withdrawal of the US" from the agreement. It was, he said, "not credible even before the withdrawal. It was proved once more that the US isn't trustworthy as regards its commitments."

Johnson said that during his trip to Washington, DC earlier this week he had questioned senior US state department and White House officials and came to the conclusion that there was no enthusiasm in the US for a military option to be deployed against Iran.

But his assurance met with some observations from shadow UK foreign secretary Emily Thornberry who quoted a comment piece from the New York Times which accused the Trump administration of “employing exactly the same playbook used before the Iraq war to manufacture a pretext for war with Iran”. She told MPs: “If we did not know it before, what yesterday’s announcement confirmed is that as long as Donald Trump remains president we must get used to a world without American leadership.”

Iran watchers who think the Trump administration’s game is to foment an uprising among frustrated Iranians were given grist for their theory by a note put out by Capital Economics, saying: “…the [nuclear deal] decision is likely to precipitate a downturn in Iran’s economy. The uncertain political environment is likely to weigh on investment and, if Iran struggles to conduct international financial transactions, strains in the balance of payments will intensify. The Iranian rial is likely to weaken, pushing up the cost of imported goods and causing inflation to rise. In light of the protests that erupted earlier this year, there’s a threat that this reignites social unrest.”

Germany, France, Italy most invested
Italian Prime Minister Paolo Gentiloni is another European leader vocal about preserving the JCPOA, stating: “[The agreement] contributes to the security in the region and puts a brake on nuclear proliferation.” And it is perhaps not surprising that Gentiloni is sticking his neck out given that of the EU countries it is actually Italy, Germany and France that have invested the most in Iran since in January 2016 the accord lifted crippling economic sanctions against the country.

The UK, meanwhile, has made little progress in building up trade and investment with the Iranians, with the sluggishness often attributed to a certain sycophancy towards the US, given the hopes a post-Brexit Britain may place in building up business with the Americans. British exports to Iran moved up nearly 40% y/y in 2016 to $356mn, somewhat paltry compared to Germany’s €3bn last year, up 15% y/y.

On May 8, the UK Foreign Office put out revised recommendations to British firms investing in Iran. It advised the companies to consult the US Treasury sanctions plans, while also arranging to obtain their own legal advice on them.

Billions upon billions at stake
The value of trade between the EU and Iran overall grew from $9.2bn in 2015 to $16.4bn in 2016. Last year, it reached $25bn. If the JCPOA era had met with a friendly US administration it is thought a great array of massive investment deals involving Iranian, European and American companies would be well under way by now. Iran has plans to source $200bn of investment for its oil, gas and petrochemical industries and Iranian airlines have lined up spending plans for $38bn worth of Boeing and Airbus aircraft.

In Washington, the Boeing deal is already being talked of as dead, but the situation for Airbus is frustrating. Given that the aircraft manufacturer uses US parts it requires American government licensing to sell to Iran. Good luck on talking Trump round on that one.

An interesting test of Europe’s seriousness in shielding its companies and banks from Iran sanctions may be seen when it comes to the fate of French energy major Total’s signed deal with Iran to invest an initial $1bn in developing part of the world’s largest gas field, South Pars in the Persian Gulf. Patrick Pouyanne, the chief executive of Total, which has also been drafting plans to make major petrochemical production investments in Iran, has called for the EU to pass a blocking statute, similar to one passed in the 1990s, to protect EU firms from US sanctions.

Germany, which has seen bilateral trade with Iran gain 42% since 2015 to €3.4bn a year, will be loathe to see the JCPOA wrecked. Dieter Kempf, president of the Federation of German Industries (BDI), asserted that Germany is not prepared to give up on Iran as a market. “Our firms have invested a lot of hope in the market openings that resulted from the lifting of the economic sanctions,” he said. “Now these prospects have been considerably dampened.”

According to Bloomberg tanker tracking, the bulk of Iran’s crude oil exports find their way to China, India and Korea, with Turkey in fourth place. Given the huge importance of oil to Tehran’s hard currency revenues and reserves, the Iranians will be wary not only of countries being intimidated into not taking their oil but of the snapback of US sanctions causing international shipping companies to decline further carrying of Iranian oil. In the past six months, they have carried more than half of Iran’s oil exports.

However, China and India are not expected to take much notice of unilateral sanctions levied against Iran by the US, and given their sheer thirst for oil, the Iranians’ crude exports may not after all suffer so much under the new US foreign policy towards Tehran.

Ambassador Grenfell: Get out of Iran
The kind of intimidation those doing business with the Iranians can expect from the US was perhaps given a runout on May 8 by Trump’s new ambassador to Berlin, Richard Grenfell. Hours before the US president attempted to take a wrecking ball to the JCPOA, Grenfell, a Trump loyalist and former Fox News contributor, tweeted that German companies should get out of Iran.

One of those companies is German industrial giant Siemens. Reuters reported its chief financial officer Ralf Thomas as telling journalists on a call that Siemens was still “assessing the implications of the Iran decision”. He added: “One of the strongest industrialised countries in the world has made a political decision—as an industrial company we have to recognise that. [Existing projects will be completed] as far as legally possible.”

Meanwhile, Germany’s Volkswagen, another investor in the Islamic Republic since it resumed exports to the country of 80mn in 2017, said it was monitoring the nuclear deal situation closely.

In France, government officials said they were seeking an understanding with the US to safeguard its carmakers’ significant Iran investments. Peugeot maker PSA, which has reported 445,000 vehicle sales in Iran last year, made its own appeal to the European Union to stay united in defending the nuclear deal.

France, Germany and Italy have lately introduced euro-denominated export guarantees drawn up to avoid US dollar exposure and withstand sanctions.

But the bad news for those rooting for a preservation of the JCPOA is already trickling in. Reuters has reported that France’s export finance programme for Iran, which had been due to launch in May-June, had been “put on hold” in recent weeks pending Trump’s nuclear deal decision. Austria’s Oberbank has for now decided not to provide financing to Iranian counterparts “due to the constantly changing political framework” and as for Germany’s Hermes export guarantee scheme for Iran, well that remains in place for the time being.