The European Union is characterized by economic balance. That makes it internally strong. In dealing with Donald Trump’s Iran policies, however, it is a disadvantage.
These are grim days even for a Trumpian era with which world peace, the climate and decency have had to come to terms for a year. The U.S. president’s withdrawal from the Iran nuclear deal has shown that the rest of the Western world is almost politically incapable of acting in a conflict central to the world community, and that there is one main reason for this: the power of the American economy.
Iran’s leadership had a single incentive to freeze its nuclear program, namely the prospect of investment in its country and international trade. Yet the U.S. government has left no doubt that it will punish all foreign firms that violate their newly imposed sanctions on investments and trade. In reality, it has the power to do that. As soon as foreign firms use the dollar or do business in the U.S. market, it can forbid them to do so or make them pay up.
For European firms, choosing between the largest market in the world and the hope for a few deals with the mullahs’ regime is a clear choice. If they already need to choose between a theocratic regime and an unpredictable government, then they will at least go where they can earn more money. French energy company Total announced Wednesday that, without explicit permission from the U.S., it will not invest the several billion euros it planned to spend on the development of Iranian gas fields. Siemens, too, is just as unlikely to risk access to America for business in Iran as the medium-sized European firms invested there.
It Will Not Get Better under Trump
Accordingly, Trump has taken away everything Europe’s political leaders could offer Iran. Specifically, if European economic ministers approach Tehran with plans for factories and machines but do not have the support of European business, then the nuclear deal is no longer attractive to Iran’s leadership.
Now, American secondary sanctions are nothing new. Before Trump, billions of punitive damages were incurred by European banks that circumvented U.S. embargos. What is new is that, since Trump took office, the power of the dollar is being added to the power of poor impulse control and shameless short-sightedness by the head of state.
That in itself is not a happy state of affairs. The bleak truth is that it will not get better in foreseeable times.
On one hand, that is due to the fact that Trump will still be in office at least 2 1/2 more years, and we can’t preclude the possibility it will be 6 1/2 more years. The president has great power in matters involving sanctions and trade, and because we can’t expect that Trump will yet develop into a long-term thinker (or even a thinker at all), he will care little about the consequences of isolating his country, as long as the consequences show up as short-term profits. He will sell the results as fulfilled campaign promises even if, in this way, people who place their trust in him live in a country full of hate, and in the worst case, a world with more war.
The hope that Europe will still be able to translate its economic strength into political power is further less well-founded because Europe itself is not willing nor in the position to formulate and represent common interests. During his visit with Trump, even the recently crowned super European Emmanuel Macron hinted that the French (sly subtext: unlike the Germans) have no trade deficit at all with the U.S.
Even if a European leader were to say, “We’re now going to do something extreme, too” and Angela Merkel tweeted “TOTALLY UNFAIR! We demand compensation for European firms! You better watch out, Donald, or, let’s say, we’ll confiscate your private plane. …”
Even with careful consideration, it would certainly not take long for an exporter of [things like] blankets to prevent rheumatism that have protected designation of origin status* to pressure his country to veto European action for fear of losing sales.
That such a thing is possible in Europe is an accomplishment, because the EU bureaucracy is a system that cannot be overcome by non-Trumpness or conflict management. It reduces the power of powerful individuals at the expense of the weak.
Even China Still Needs the US
Nevertheless, that which stabilizes Europe internally is exactly what makes it weak externally. Thus, Europe is losing influence with China, which has been quickly and decisively building structures that will benefit it in the long term in the wake of America’s global isolationism. China’s leadership immediately announced that it would continue to buy oil from Iran, and in any case, it plans to conclude such transactions in its own currency, supporting its ambition to leverage the yuan as an alternative currency to the dollar. Added to that is the development and financing of the new Silk Road, which the nation is using to expand its economic influence in Asia and Africa as well as its development policy in Southeast Asia.
For the foreseeable future, the Chinese, like the Europeans, still need the U.S., and not only their consumers. Paradoxically, they even need the debts that these consumers and the U.S. government are running up. Europe and China are investing the money they receive for their goods in the U.S., so that the trade deficit that Trump complains about comes back in the form of investment and credit.
This, however, also describes what Trump does not understand, and what will count in the long run: that there is a benefit to many of the costs he complains about. The Chinese understand that, and they fill every vacuum of power that the world presents to them. Europe’s tragedy in the conflict regarding the nuclear deal with Iran is that the continent is not succeeding in translating its economic strength into political power and joint action, and that up to now, there are no constructive ideas about how to succeed against the interests of a Trump America.
*Editor’s note: Protected Designation of Origin or PDO is a European Union product certification system that requires products to be produced, processed and prepared in a specific region using traditional production methods.