Playing ‘Sanction-ism’ Pushes the US into Isolation

Author: Salman Rafi Sheikh

Column: Economics

Region: Europe

With Iran receiving both diplomatic and financial support from the EU and with Russia and China standing behind Iran, the US exit from the Iran nuke-deal and re-imposition of ‘toughest sanctions’ have backfired in a way that the US leadership don’t seem to have anticipated. While Iran’s leadership is standing firm in the face of threats emanating from the US and Israel, the latest developments have confirmed that even the traditional West—not all of it of course—is looking to the East for its future. Major EU powers, such as Germany, have clearly expressed the desire to launch a transition to an independent trasnfer system of the US to save the Iran deal and off-set the looming threat of US sanctions. On top of the financial aid the EU has announced for Iran to allow the latter to survive the up-coming new round of sanctions in November. This development has certainly rung alarm in the US and among its allies in the Middle East, Israel and Saudi Arabia, regarding their plans to cripple Iran and make it surrender.

The reason, however, for countries like Germany to support Iran is not simply their disagreement with the US over the deal; their actual reasoning for this support is the precarious position they will be in if Iran ever decides to close the Strait of Hormuz and leaves the EU dependent on Russia only for the supplies of gas. As such, while the EU seems like looking eye to eye with Russia on Iran, their mutual relations are still not deep enough to warrant a strategic inter-dependence, although Putin and Merkel did discuss and announce the Nord Stream pipeline as well as cooperation in post-war reconstruction of Syria.

However, despite the promise of cooperation, it is the fear of losing energy supplies, especially when the push comes to shove, even from Russia and Central Asia that is driving Germany away from the US policy vis-à-vis Iran and promoting its advocacy of an independent payment system.

The lip support for this transition has come directly from German foreign minister, Heiko Maas, who recently wrote a piece in Handelsblatt business daily, arguing that “it is indispensable that we strengthen European autonomy by creating payment channels that are independent of the United States, a European Monetary Fund and an independent SWIFT system.”

Pinpointing the disagreement with the US, Maas wrote, “Given the circumstances, it is of strategic importance that we tell Washington clearly: we want to work together….But we will not allow you to hurt our interests without consulting us.”

Obviously, if the EU believed that Washington had the capability to re-open the Strait of Hormuz in the event of Iran sealing it, the EU might not have opted for supporting Iran. But the attempts of Brussels to distance itself from the US stems from the fact that the Pentagon will not be able to force Iran into opening the Strait, especially in a situation that was particularly stressed by Tehran, when thousands of American soldiers and US air bases in Iraq, Syria and Afghanistan, are within the range of Iranian missiles.

While some political pundits in the US have argued that this seeming shift in the EU is only temporary and is only talk for the time being, economic trends emerging from within the EU suggest a rather long term shift.

For instance, it is not just US’ Iran policy that has backfired; it is equally the US trade war with China. Europe, instead of simply subscribing to the US interests, has instead moved towards increasing its investment in China. Germany’s big three automakers announced groundbreaking joint ventures with Chinese firms as well as major expansion plans. Siemens, Germany’s top capital goods provider and chemical giant BASF also announced major projects in China, while BMW warned that the Trump tariffs might cause it to allocate jobs from its South Carolina plants to China.

Turkey, recently hit by US sanctions and tariffs, has also found in Germany a friend willing to help it survive the economic crisis. The German government is toying with the idea of providing Turkey financial assistance, and in return intends to negotiate a better management of the Syrian refugees. The head of German’s Social-Democratic Party, which is a partner in the coalition government of Merkel, Andrea Nahles has proposed financial aid; while government spokesmen have indicated that financial support for Turkey is possible under specific conditions.

Part of all this attention Germany and the EU are paying to Asia (Russia, China, Iran and Turkey) is the result of a wider belief in the fact that the centre of global economics is shifting from the West to the East. While the US would resist this shift because it comes at the expenses of its own leadership role, Europe sees in this shift a necessity of moving accordingly not only out of its energy dependence on Asia, but also other economic opportunities that Asia, which delivers about 60 per cent of world economic growth, offers to them.

Accordingly, while the US is trying to cripple Asia by sanctioning major Asian economies, the EU is trying to find friends. Of course, allying with Asia also allows Europe to end its over-dependence on the US.

The new EU legislation to protect EU companies from US sanctions will significantly transform the EU-US disagreement over sanctions from discursive level to institutional and constitutional levels, cementing the EU effectively with the East, leaving the US in a virtual state of isolation.

Salman Rafi Sheikh, research-analyst of International Relations and Pakistan’s foreign and domestic affairs, exclusively for the online magazine “New Eastern Outlook”.

https://journal-neo.org/2018/08/27/playing-sanction-ism-backfires-the-us-to-isolation/