In an effort to preserve the Joint Comprehensive Plan of Action (JCPOA), often called “the Iran deal”, France is seeking to extend a credit line worth nearly 14 billion euros (15 billion US dollars) to Iran until the end of year – in return for Iran coming back into compliance with the 2015 nuclear deal. The credit would be guaranteed by Iranian oil sales.
This offer is in addition to the proposed Instex trade mechanism that would allow Europe to barter humanitarian aid and food with Iran, but not oil – their chief export. Iranian officials have repeatedly countered that Instex must include oil sales, or provide substantial credit facilities, for the mechanism to be beneficial to them. Both proposals require Iran to set up a mirror company that meets international standards against money laundering and terrorism financing.
“The Iranian mirror structure is not operational. The day they have signed the necessary FATF (Financial Action Task Force) conditions we’ll talk about it and the day that we are sure that the first transactions through Instex aren’t put under American sanctions, (then) we’ll talk about it again”, said a diplomatic source. Initially, the Instex mechanism did not require Iran meeting the FATF preconditions.
An Iranian delegation came to Paris, including oil and finance officials, to discuss the matter. The agenda entailed hammering out details of France’s proposed credit line and seeing how it can offer Iran respite from US-imposed sanctions that have cut off Iran’s ability to export oil, severely crippling their economy.
A senior Iranian official familiar with the negotiations said, “France has offered the credit line of 15 billion US dollars but we are still discussing it. It should be guaranteed that we will have access to this amount freely and also Iran should be able to sell its oil and have access to its money… President Macron is trying hard to resolve the issue and help to save the deal … and we have overcome some issues and gaps narrowed, but still there are remaining issues.”
A second Iranian official stated that “Although the EU and particularly France have good will, they should convince the US to cooperate with them… If not, Iran is very serious about decreasing its nuclear commitments. There is no logic to respect the (2015) deal, if it has no benefits for us.”
France has been in talks with counterparts in China, India, and Japan – the three main purchasers of Iranian oil before US sanctions were levied. French officials have relayed that the three countries are ready to continue buying Iranian oil, but only on the condition that the US issues waivers.
“The French initiative is the last best hope for salvaging” the deal, said Ali Vaez at the International Crisis Group. “The key for its success is to provide Iran with some economic reprieve in the form of increased oil exports in return for compliance with the JCPOA and commitment to engage in new negotiations.”
Can the US Get on Board?
Getting US approval on the credit line is the main hurdle, and French Finance Minister Bruno Le Maire visited Washington in part to discuss the measure. Permission may be hard to come by however, considering the current stand-off between Iran and the US. The credit line also requires Iran to be able to sell its oil at some point – an aspect of the deal the US is vehemently opposed to.
Meanwhile, Iran has asked for 2.5 million euros per month to extend consideration for France’s proposals beyond the year’s end. If proactive steps for resolution are not taken within the next two months, Iran has pledged to continue violating the deal. French Foreign Minister Jean-Yves le Drian noted that as things stand, it is all “very fragile”.
While Iran initially abided by the agreement in hopes that European countries, along with Russia and China, could help them survive US sanctions, the other states have not been able to sufficiently grant Iran the relief it seeks. The sanctions have deterred European companies from doing business with Iran, lest they lose access to the American market. As a result, Iran has taken steps to violate aspects of the deal in order to pressure Europe, and will continue escalation using these measures if Europe doesn’t “fulfill their obligations”.
Iran has disregarded the 2015 nuclear deal several times to date, with actions that include stockpiling material and announcing it had stopped honouring the deal’s limits on research and development. The IAEA also confirmed that Iran has been enriching uranium up to a purity of 4.35 percent, which is above the 3.67 percent allowed under the agreement.
Iranian Deputy Foreign Minister Abbas Araghchi made the state’s position clear: “Iran… will return to full implementation of the JCPOA only if it is able to sell its oil and to fully benefit from the income from these sales”, he said.
“The Iranians are trying to create a sense of risk and leverage with Europe and others so they will be more willing to push back on the United States with respect to sanctions”, Richard Nephew, a former State Department sanctions expert who helped negotiate the nuclear deal and is now a scholar at the School of International and Public Affairs at Columbia University, via an email to the New York Times “I think the Iranians are still approaching this in a sequential and incremental way,” he said. “I don’t think they’re doing all they could do. But they’re definitely turning up the heat on Europe.”
United States officials remain sceptical of the French proposal, even as President Trump seemed to flirt with the idea of a credit line as part of broader negotiations with Iran – which was followed by the letting go of his security advisor, John Bolton – a staunch supporter of sanctions. Trump has stated that he is ready to meet with Iranian President Rouhani “without preconditions”.
What’s evident is that without US waivers on sanctions, the proposed credit line is dead on arrival. A senior Trump administration official was quoted as saying “the Europeans are desperate to salvage a terrible deal”. A senior State Department official, meanwhile, insisted that “There are no discussions taking place between State Department officials and European officials to reinstate Iran waivers or relax our pressure in any way.”
On September 4th, the Trump administration turned up the pressure on Iran by announcing new sanctions, and unveiled a reward programme called “Rewards for Justice” in which the US has offered to pay off tanker ship captains if they aid in impounding Iranian vessels transporting oil. The United States also signalled they were not likely to grant the waivers France needs.
“There will be more sanctions coming…We can’t make it any more clear that we are committed to this campaign of maximum pressure and we are not looking to grant any exceptions or waivers“, said Brian Hook, the US Special Representative for Iran, at the State Department. “That’s not happening – that won’t be happening”, Trump said during a briefing in the Oval Office.
“Every port operator, ship owner and management company should steer clear of the targets identified today”, Hook said at the State Department. “The economic and reputational cost that result from US sanctions are not worth the modest gains of doing business with Iran.”
The US has also amped up its rhetoric, condemning Iran’s sluggish cooperation with IAEA inspectors, calling it “unacceptable”.
“Any indication that Iran is providing insufficient cooperation to the IAEA on a matter involving potential undeclared nuclear material or activities raises serious and profound questions”, the US statement to a quarterly IAEA Board of Governors meeting read. “Iran’s failure to resolve the Agency’s concerns on this matter is completely unacceptable and should be of deep concern to all who support the IAEA and its safeguards verification regime.”
France in the Lead
The situation with Iran and the fate of the JCPOA is tricky, but it does reveal a new international norm: France, not the United States, is spearheading international diplomacy these days.
Over the past few months, President Macron has played a fundamental role in brokering agreements over top EU jobs; fronting a risky diplomatic initiative with Iran; taking up efforts to counter Russia in Ukraine; and hosting a G7 summit with the assumption that he would able to broker an agreement between Donald Trump and Vladimir Putin.
Macron has had mixed results so far. He has failed to really win over either Trump or Putin on issues like Iran, climate change, or Syria. At the latest G7, he was able to net modest wins, such as an aid package for the Amazon and some progress on a digital tax. Still, with its status as a nuclear power, its robust military, and a permanent seat on the UN Security Council, France has serious clout that may herald a longer-term shift in global leadership.
“Not since the  Paris climate agreement has France played such a central role in international diplomacy”, said Michel Duclos, a retired French ambassador.
Macron is ultimately likely to be judged on how he handles protracted problems like relations with Iran and the conflict in the Ukraine. Efforts with Iran are demonstrably ongoing, which is a point in Macron’s favour and bolsters his credibility in the arena.
“The role of France is to be a mediating power … our unique role is to speak with everyone … and try to build useful solutions on a universal level”, Macron told reporters at the end of the G7 summit in Biarritz.