Can a Renewed Iran Nuclear Deal Solve Europe’s Energy Problems?

When one year ago I discussed the potential for a renewed Iran nuclear deal with Mr. Raffael Grossi, Director General of the International Atomic Energy Agency (IAEA), I expressed deep skepticism. US Secretary of State, Antony Blinken, is no John Kerry. I remember Kerry’s visits to Geneva at Hotel Intercontinental – the place the Americans would meet their Iranian counterparts, just meters away from the UN headquarters. That first deal in 2015 took some craftsmanship to accomplish. When President Donald Trump came in guns blazing trying to eradicate anything that had the Obama stamp, and withdrew the US from the deal, Trump underestimated how much work it takes in order to get to something like the JCPOA. I was skeptical the Biden Administration would be able to pull it off.

About a year ago, as I was sitting at the HEI Graduate Institute in Geneva discussing the potential for a revived deal with the IAEA chief, I was sure that a Biden Administration won’t be able to accomplish what Team Obama did several years earlier. Fast forward one year and I am about to be proven wrong. A new Iran nuclear deal is on the verge of taking place and it will be easier to achieve than what was thought of as feasible previously. The answer is that a year ago the Ukraine-Russia war was not a factor in the picture.

Sources tell Al Jazeera Arabic that an agreement to revive the landmark accord abandoned by the US is soon to be announced. The deal contained in the European proposal is “imminent”, according to Al Jazeera. The sanctions on Iran will be removed with the release of Iranian oil and gas exports in return for the scaling back of the Iranian nuclear program. In other words, Iranian oil and gas are about to flood global markets in times when few see alternatives to Russian energy.

Last week, the EU delivered a “final” draft to the Iranian side and in response, the Iranians dropped a point which until recently was seen as a red-line demand. Previously, Iran demanded the removal of the Iranian Revolutionary Guard Corps from the US State Department’s list of Foreign Terrorist Organizations. CNN reported that this week Iran dropped the demand.

According to the Business Standard, oil prices fell over 2% this week to their lowest since before Russia’s invasion of Ukraine, as economic data spurred concerns about a potential global recession, while the market awaited clarity on talks to revive the deal that will allow Iranian oil and gas exports. The most important aspect is that within 120 days of signing the agreement, Iran will be permitted to export 50 million barrels of oil per day.

The expectation is that this would increase global supply and tank the price of oil, in times of global inflation and dissatisfied voters. Business Standard reports that oil prices are already slipping amid chance of a deal. Bloomberg reminded that last time, in 2015, analysts significantly underestimated how quickly and how much Iran can start pumping and shipping oil. A Bloomberg analysis points out that the European proposal to revive the Iranian nuclear deal “has stoked speculation that millions of barrels of oil are set to flood world markets”. One thing is sure: the markets are watching closely, as the nuclear deal assumes global relevance beyond strictly security concerns.

An op-ed in the Washington Post argues that Iran’s oil would fill a Russia-shaped hole in energy supplies. Can Iranian oil and gas become the solution for Europe? Iran has the world’s second largest natural gas reserves after Russia, which makes Europeans even more eager to re-open relations as quickly as possible. Some argue that pipelines connecting countries can be build rather quickly. The EU will ban partially some types of Russian oil on 5 December this year, hoping that Iran will fill the gap left in the meantime. On June 3, 2022, the European Union adopted a sixth package of sanctions, including a partial embargo on Russian oil. The sanctions will ban seaborne imports of Russian crude oil as of Dec. 5, 2022, and ban petroleum product imports as of February 5, 2023.

Following the 2015 deal, the EU turned to Iran as an alternative to Russian oil and gas. At least for Europe, Iranian oil and gas have been seen as a serious energy alternative to Russian oil and gas. It’s also more likely to expect Europeans to lead the process, as we are seeing now.

Iranian oil and gas will become an energy alternative to Russian natural gas, amidst Russia’s war on Ukraine. When you put it that way, lifting the Iranian sanctions quickly becomes solvable, especially for Europeans. That’s why the EU is in a hurry.

Europe doesn’t share the same history and relations with Iran as the tense US-Iranian relations. That’s why the EU can allow itself more than its American counterparts. US-Iran relations history includes shameful American coups, assassinations and regime overthrows in Iran, the capture of the US Embassy in Tehran by Iranian students, the assassination of Iranian General Soleimani, and many other rock-bottom points. That path is very different for Europe. Throughout the years, many European countries and businesses have tried to find ways to circumvent American sanctions on Iran – either because of human rights concerns or because of strictly business concerns.

For US politicians there are also the November mid-term elections and a stance on Iran will be a prominent factor especially for Senators on the foreign relations committees where pleasing Israel is a big factor in the mix. In comparison, the EU is taking the initiative and rushing to get the deal done just before winter when EU countries will find themselves at the mercy of President Putin, as they implement the new package of sanctions on Russia. Iran can provide an answer to European energy supply needs and fears without being constrained by the baggage that American politicians will be judged by.

[Photo by M.Mahdi Dorani, CC BY 4.0, via Wikimedia Commons]

*Iveta Cherneva is an Amazon best-selling author and political commentator. The views and opinions expressed in this article are those of the author.

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