Europe Watches Iran Violence Warily

By Laurence NormanFeaturesDow Jones Newswires

The Iranian government's suppression of nationwide protests is rippling as far as Brussels, where European Union officials already worried about survival of the 2015 nuclear deal see the unrest as a vexing complication.

The bloodshed, which has claimed more than 20 lives, could erode backing for the nuclear deal at a critical time. President Donald Trump's administration decides again next week whether to continue suspending U.S. sanctions on Iran.

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Government violence may also deepen doubts about a pivotal narrative of European and U.S. nuclear-deal supporters: By lifting sanctions and reconnecting Iran's economy to outside investment, Iran's reformist forces would gain the upper hand at home.

For the first days of the protests last week, Europe's response was public silence, although top EU diplomats privately pressed Teheran for restraint. Europeans were uncertain about the nature and aims of the protests and were warier than their U.S. counterparts about whether Western support would help or hurt Iranians on the streets.

When European silence drew criticism from some in Washington, Israel and elsewhere, the EU and several member states weighed in on Monday, calling for peaceful protests to be allowed.

On Tuesday, the EU issued a common statement criticizing the "unacceptable loss of human lives" and said Brussels would stress human rights as a "core issue" in the EU-Iran relationship. After a call between French President Emmanuel Macron and his Iranian counterpart, Hassan Rouhani, France said its foreign minister was postponing a planned trip to Tehran this weekend.

The EU's words haven't been matched by action. The Trump administration is weighing fresh human-rights sanctions against Iran, but senior EU diplomats say that isn't currently on their agenda. Any such move would need backing from all 28 members.

The Iranian government says the deaths came as a result of violent protests, and Iran's foreign minister, Javad Zarif, said Thursday the Trump administration's undermining of the nuclear deal has deprived them of the economic dividends of the agreement.

As critics of the nuclear deal in Washington know well, it is the EU that has real economic leverage with Iran. U.S.-Iranian commerce remains slim even though some U.S. sanctions on Iran were lifted as part of the nuclear deal.

Europe's trade with Iran, which slumped after its sanctions peaked in 2012, has rebounded rapidly, mainly in the energy sector. Germany, Italy and some other EU countries started offering government-backed guarantees to protect their investors. Germany's Hermes credit guarantees, for example, have been provided in 47 business deals, totaling EUR795 million ($959 million), since mid-2016.

Many foreign investment plans have been announced, though a large proportion have yet to become reality, in part because large European banks and other firms remain wary that Washington could reimpose sanctions.

In October, Mr. Trump refused to certify Iran's compliance with the nuclear deal and asked U.S. lawmakers to rewrite domestic legislation to add new constraints on Iran's future nuclear activities. He must decide again next week whether to extend waivers that keep sanctions suspended.

European diplomats have been lobbying Congress to stand by the nuclear deal. Before the protests erupted, they were increasingly optimistic that Washington wouldn't scuttle the agreement. Diplomats said they felt that while the U.S. Iran Nuclear Agreement Review Act legislation may be amended, the changes wouldn't be sweeping and Congress would not reimpose sanctions.

However, European officials involved in Iran policy remain worried that the continued attacks on the agreement by Mr. Trump and heightened tensions between Washington and Tehran over Iran's missile program and its regional interventions would perpetuate uncertainty about the deal's future.

That has some European officials seeking ways to allow increasing Western business with Iran to filter down to benefit ordinary Iranian citizens. Many believe commercial benefits are being channeled to political and business elites, and to Iran's support for the Assad regime in Syria and other regional proxies, diplomats say, a charge echoed publicly by Mr. Trump.

Underlying that approach is a vision of the nuclear agreement, prevalent in Europe, as a potential game-changer in the internal Iranian struggle between hard-liners and apparent moderates. The hope has been that lifting sanctions would strengthen Iran's economy, in turn giving Iran's current, relatively moderate leadership greater freedom to drive domestic economic and political reforms and shun any future large-scale nuclear program.

EU foreign policy chief Federica Mogherini told EU lawmakers last month that undermining the nuclear deal weakens "those in Iran's political scene that are trying to commit in their own way ... towards an opening and an engagement with the rest of the world."

It's an argument critics of the nuclear deal have long mistrusted. They believe Mr. Rouhani's current government is as wedded to the regime's basic domestic and foreign policies as those around arch-conservative Supreme Leader Ayatollah Ali Khamenei.

The skepticism about the nuclear deal's positive influence inside Iran may carry greater weight if -- as appeared increasingly likely Thursday -- the protests crumble under the crackdown of Mr. Rouhani's government.

--Andrea Thomas in Berlin contributed to this article.

Write to Laurence Norman at laurence.norman@wsj.com

(END) Dow Jones Newswires

January 04, 2018 10:16 ET (15:16 GMT)