By Garret Martin, Editor at Large, European Affairs

As talks resume between Iran and the P5 + 1 (the informal group made up of the five permanent members of the UN Security Council plus Germany), the stakes, including war or peace, are high for every one – and not least for EU. European countries have invested much political capital in engaging Iran over the last twenty years, sometimes parting ways with Washington over the issue. In recent years, especially since the last round of talks with Iran broke off 15 months ago, the EU leaders have closed ranks with the U.S., especially the so-called E-3 countries directly involved in the talks – Britain, France and now Germany. Now, with the stark backdrop of the continent’s own economic woes, the EU badly needs a foreign-policy success to keep alive its diplomatic credibility and ambitions to be an influential global actor.

In the last six months, the enduring tension between the international community and the Islamic Republic of Iran over its nuclear program has escalated dangerously. Tension notched up last November with a report released by the International Atomic Energy Agency (IAEA): the report by the UN nuclear watchdog marked a break with past findings by expressing in very stark terms, and through extensive documentation, its serious concern that Iran had previously pursued nuclear weapons work.

President Barack Obama, in part because of the IAEA findings, signed a law in December 2011 with measures to stop foreign financial institutions from dealing with Iran’s central bank; at the end of March 2012, he added fresh sanctions targeting foreign banks involved in trading Iranian oil. These unilateral (and potentially extra-territorial sanctions) have not been approved by the UN and are contested by key players such as Russia.

Added to this already volatile context, the war rumblings from Israel suggest that it is increasingly contemplating a unilateral strike against Iran. Officials in the Netanyahu government have repeatedly insisted that time is running out to stop Iran’s nuclear plans. Before long, most of the uranium enrichment to weapons-grade level will take place at Fordow, a facility buried deep in a mountain complex that would not be easy to target.

Hoping to avoid a military confrontation, the EU embraced a tougher stance towards Teheran in January, joining the U.S. with far-reaching sanctions to ratchet up the pressure for renewed negotiations. Starting in July, the measures from Brussels will ban trade of Iranian oil and related financial dealings including insurance. The measures will also prohibit investment and the export of equipment and technology for Iran's petrochemical sector; further restrictions will target Iran's central bank and the trade of gold, precious metals and diamonds.

The EU views pressure as a means to bring Teheran back to the negotiating table and to help ensure that it fulfills its international obligations as a signatory of the Non-Proliferation Treaty. The scope of the new set of sanctions apparently facilitated the former goal: in February, Iran's chief nuclear negotiator Saeed Jalili proposed holding new talks in a letter to the EU High Representative for Foreign Affairs and Security Catherine Ashton. In her capacity as the contact point for the P5 +1, Ashton accepted Jalili’s offer, with the purpose she said of reaching “a comprehensive negotiated, long-term solution which restores international confidence in the exclusively peaceful nature of Iran's nuclear program.”

It remains to be seen whether Teheran will accept the key Western demands that are likely to center on halting uranium enrichment at the Fordow plant, in exchange for the right to maintain commercial nuclear power under international supervision. Any failure or stalling of the negotiations could lead to unpredictable consequences, including increased chances of a military confrontation. Obama said that the “window” for a peaceful outcome “is closing.”

Not just for the U.S. and Iran. Iran presents a major test for EU foreign policy ambitions – a comprehensive one that could jeopardize its institutional reforms designed to increase its diplomatic clout under the Lisbon treaty. It is the most serious challenge yet to the credibility of the EU foreign policy head and the European External Action Service (EEAS), the two important diplomatic institutional innovations of the Lisbon Treaty. Since assuming office in December 2009, Ashton’s performance, including her running of the diplomatic corps, has encountered some criticism. In December 2011, for example, the foreign ministers of twelve member states sent a message to the EU foreign policy chief lambasting the fact that bureaucracy and poor management were hampering the EEAS.

Beyond Ashton’s credibility, Iran matters for the EU because of the extent to which the EU has come to depend on sanctions as a key tool in its diplomatic arsenal. The EU has become a sanctions machine. Since 2010, it has imposed punitive measures – including import bans, limits on financial dealings, freezing of assets or prohibiting individuals from entering the EU – against nine countries: Iran, Syria, Belarus, Myanmar, Zimbabwe, Côte d’Ivoire, Egypt, Tunisia and Libya.

EU members pride themselves for achieving unanimity in opting to pressure rogue regimes, but significant doubts remain about the efficacy of sanctions in general, and against Iran specifically. Historically, punitive measures have had a patchy record when it comes to compelling states to change their ways, and it will be particularly the case for the Teheran government which presents its nuclear program as a source of national pride. Even if it damages the Iranian economy, the embargo is unlikely to destroy either the economy or the nuclear program. Iran has shown resilience in the past and still sells most of its oil to Asia. Moreover, the sanctions could prove costly for the EU. Even if Saudi Arabia steps in to compensate, the progressive oil ban could lead the price of crude oil to skyrocket, threatening weak Western economies. That could undermine the EU’s fragile unity over the latest sanctions against Iran. Britain, France and Germany had to make a number of concessions, in order to get Greece, Italy and Spain on board, notably by allowing them more time to find alternative sources of oil.

The EU has long sought to translate its economic might into international political weight, to be able to project a united, coherent and influential voice on the world stage. Success in the Iranian issue has become more important for Europe at a time when the EU has come to be seen as a problem for the world. The current woes of the Eurozone are, after all, undermining the EU’s normative powers, and its claim to be a peaceful and successful example of cooperation and integration. In that sense, of course, sanctions are the other side of the coin of European economic power in inducing cooperation via trade, aid and transfer of technologies to cooperative countries.

The EU has invested heavily in engaging Iran. It initiated a dialogue with the Islamic Republic in 1992, which increased in scope after the moderate Mohammad Khatami became President in 1997 and eventually covered issues such as human rights and cultural relations. Aiming to empower Iranian moderates and foster domestic reform, the EU pursued its dialogue throughout the 1990s and early 2000s, despite pressure from the US to try and undermine the Islamic Republic through economic and political isolation.

That desire to pursue engagement did not abate even after the August 2002 revelation that Iran had undeclared nuclear sites in Natanz and Arak. Quite the opposite: the transatlantic divide over Iraq helped convince the E-3 that they needed to cooperate more closely on Iran. They jointly approached Teheran in the fall of 2003 with the hope of achieving a diplomatic solution that would not only answer doubts about Iran’s atomic ambitions, but also prevent any chance of an American military strike. The three European powers, along with the other member states, believed that the Iran challenge was one crisis that they could settle, and one where they could prove that other strategies could be more successful than the unilateral approach adopted by the Bush administration. In the following years, even as they continued to negotiate with Iran on behalf of the international community, and even after embracing sanctions in 2006, the European powers still insisted on the necessity of diplomacy and engagement.

The situation has concentrated minds in Europe. Here is a summary of the E3 position (and of Russia and China), as reported in Time Magazine after its correspondent attended a European Institute event this week on the subject featuring senior officials including  Sergey Ryabkov, the Russian deputy foreign minister.

“ – The so-called E3, the U.K., France and Germany: All three are much more inclined than the U.S. to believe that Iran is seeking to weaponize its uranium stockpiles. They have more experience negotiating with Iran as well, and that experience has taught them not to allow Tehran any wiggle room. France in particular has been pushing for a hard line: a full and complete halt to Iran’s nuclear program and the surrender of all of its uranium. “Even if they agree to hand over their 20% enriched uranium, some in Europe will argue to keep up the pressure – to not take down any of the sanctions — until they also hand over the 3.5% enriched uranium,” says a European diplomat. In other words: the Europeans don’t think confidence-building measures will work — or might allow Iran to delay and wiggle too much — and are seeking an all-or-nothing line with Tehran.

“ – Russia and China: Both countries view the U.S. and European Union sanctions as distasteful and dangerously unrelated to Iran’s nuclear program. They’ve been seeking to decouple the two issues, or at least ease the sanctions. “We’ve never seen any movement on the Iranian part under pressure,” Ryabkov said. “We’ve only seen more stubbornness.” Indeed, Iran recently announced it would pick up its pace of uranium enrichment despite crippling economic sanctions that have seen the real, the Iranian currency, lose 75% of its value over the last year amidst hyperinflation. China and Russia both still argue that a nuclear-armed Iran won’t be tolerated: “The Iranian side must do much more to show its seriousness.”

In other words, even after ten years of negotiations and brinksmanship, uncertainty remains high in regard to Iran’s nuclear program. So the stakes have continued rising. Now, a failure of the Istanbul talks would have unpredictable consequences, including a possible military confrontation. Less talked about in the event of failure is a certainty: a devastating setback for the EU and its ambitions on the global geopolitical stage.


By Garret Martin, Editor at Large, European Affairs