Europe has uphill battle to keep Iran trade flowing without incurring wrath of US
European politicians have ways of coping with US President Donald Trump's withdrawal from the Iran nuclear deal. Their options are, however, not very good ones. The so-called Joint Comprehensive Plan of Action (JCPOA) - signed between Iran, Britain, China, France, Germany, Russia, the US and the EU in 2015 - made it possible for European firms to work in Iran without getting sanctioned by the US. Trump's blunt action reverses this in a way that will be hard to face down.
There's a precedent for the EU contesting such "secondary sanctions" that have not been imposed by the bloc. In 1996 it deployed regulation that effectively blocked European companies from complying with US strictures over Cuba and Iran. In 2007 the Austrian government used the same rules to legally challenge domestic bank BAWAG's attempt to cancel Cuban accounts.
This might offer some comfort to European companies that have returned to Iran. Ultimately the US Office of Foreign Assets Control gave BAWAG dispensation to keep the accounts.
Yet European groups may focus on a different precedent. HSBC, Credit Suisse, ING, Standard Chartered and Commerzbank received combined fines running into billions of dollars for transgressing US sanctions, while BNP Paribas alone was hit with one for $8.9 billion. Given Trump's tough rhetoric on Tuesday, new entrants into Iran would have to find a watertight way to avoid the US financial system.
That isn't easy. Even if the EU capitalized a bank to handle Iran trade exclusively in euros, the sanctions apply to US products and technology as well as dollars cleared through New York. The alternative - not doing business in Iran - will seem more attractive.
Ultimately, the EU's problem is political as much as procedural. Its member states are for the time being excluded from Trump's steel tariffs, but pushing back hard on Iran would complicate attempts to win a more permanent exemption.
That leaves the bloc with an uncomfortable choice: either use a 180-day grace period before sanctions apply to toughen the JCPOA - which Iran may not accept - or grudgingly comply with Trump's red lines.