As I was sitting in a cafe of the Vienna’s 19th Century glamorous Palais Coburg (a.k.a. Palais Saxe-Coburg), built in the neoclassical style upon the ruins of the, once, strong Vienna’s bastion-style, 16th C. fortification, nowadays turned a five -star hotel featuring the old fortification ruins in its foyer, trying to renegotiate a deal for getting a tea and a cake at a combined discounted price, I could not but feel humility in face of the fact that a historic deal of almost world-wide importance was recently also negotiated in the same palace.

But, as many international deals in the recent months, the 2015 Iran Nuclear Deal reached there [1], almost symbolically, on the ruins of the old military fortifications turned to their better use, just a few days before suffered a battering by one of its main signatures, the USA, after their decision to pull-out from the deal. My humility was even more overwhelming seeing that, a seemingly simple political pull-out, may have complex and far-reaching geopolitical consequences. Though the consequences of such, the apparently simple pull-out may not appear to be high, certainly not appearing as high as, initially also ignored, those of BREXIT, the breaking-up of this deal may turn-out to have much larger and more world-wide impacting geopolitical and geo- economical consequences than BREXIT.

For a start, the consequences are not only affecting Iran and its business or political leaders. The prices of oil and gas have jumped around the world around 1%, bringing inherent benefits to their other net-exporters in the recent years including the US. In addition, whilst others, mainly politicians of the other members of the UN Security Council and those of EU are promising to remain in the Deal, their “foot-soldiers” (or “knights”) on the ground, the managers of the companies that started to trade with Iran since the Deal was signed, may now be facing financial fines, but potentially, also legal proceedings by the US if they continue trading with a state on which the US intends to re-impose some of old and some new trade sanctions.

For example, though mainly a French, and Dutch headquartered EU firm, Airbus’s contract for delivery of around a hundred planes to Iran is now threatened to be cancelled due to US sanctions. Its share price dropped a bit on 10th May, the day after the pull-out announcement whilst the US’ Boeing rose over the same period. Despite such a small change among aeronautics giants, the share price of Renault and Peugeot, other French firms heavily involved in Iran, dropped around 6% just a few days in advance, this likely to be in an anticipation of the pre-announced US pull-out . It may not then come as a surprise that French Economy and Finance minister, Bruno Le Maire, has warned that European economic sovereignty may be also under threat from the pressure on EU coming from the US to break-out from business deals with Iran, calling for the EU to protect its businesses from the effects of these sanctions.

However, will such, sanctions-lead, legal actions and financial fines remain limited only to the business leaders or their companies directly or indirectly involved in dealing with Iran, or may the sanction-based fines and legal proceedings be also affecting directly the political leaders of their countries that continue to protect them? And, one could ask, would not these sanctions-lead legal actions affect even those leaders who, though deemed to be from US-friendly countries, have already suffered multiple humiliations - needing to beat around the bush and, so far unsuccessfully, demand exemptions from the recently imposed steel and aluminium import tariffs (see my previous article), or, as France’s President Emanuel Macron and German Chancellor Angela Merkel did, also in vain, try to influence to the last moment the President of the USA not to, unilaterally, break-out from the Iranian Nuclear Deal for which even UK’s Foreign Minister Boris Johnson is reported to have said that there was no alternative Plan B. Now, many of them may need to start to court the US government for exemptions of their businesses from the new US sanctions too, and possibly, in a time-consuming, piece-meal, case-by-case (i.e. company deal- by -company deal) fashion.

However, and again, the economies most affected by the re-imposition of the sanctions will not be the EU, which has only 0.6% of its product traded with Iran, but China and the United Arab Emirates making-up around 23% of Iran’s foreign trade.

In addition, if any company continues to trade with Iran, as one financial economist friend pointed-out, they are likely to renegotiate the deals to detriment of their Iran based partners who may then need to buy at higher and sell at lower price, to cover for increased risk premia, i.e. any increased risk their international partners are likely to be exposed-to due to the looming risk of sanctions related fines being potentially imposed on them by the US.

One can then ask if the “America First” policy will be fought as a zero-sum (if not even below-zero sum) game, at significant detriment and cost to everybody else, including their, soon-to-be former, friends, but possibly even the US itself. It may not be then surprising to read that a Belgian journal asks if Europe, humiliated by Trump, should start taking its own fate into its own hands [2]. However, as a conservative US magazine comments, these 'noises' from EU may well be ignored since, as has been summarised in the subtitle of their article, “Its Leaders Readily Condemn But Never Act” [3].

[1] The Joint Comprehensive Plan of Action (JCPOA; ..., known commonly as the Iran nuclear deal or Iran deal, is an international agreement on the nuclear program of Iran reached in Vienna on 14 July 2015 between Iran, the five permanent members of the United Nations Security Council...and the European Union.
[2] “Humiliee par Trump, l’Europe va-t-elle (enfin) se prendre en main?”, L’Echo, 10th May 2018
[3] Why Trump Can Safely Ignore Europe: Its Leaders Readily Condemn But Never Act, By J. Shapiro, Foreign Affairs, 15 May 2018