The U.S. and E.U. have been here before
From the mid-1980s to mid-2000s, U.S. sanctions policies often led to transatlantic conflict. E.U. member states actively undercut U.S. sanctions imposed against countries like Iran and Cuba to their companies’ benefits. The E.U. shared U.S. concerns about Iran’s nuclear weapons program and Cuba’s human rights policies, but preferred diplomatic solutions that would not disrupt trade. The United States tried to use secondary sanctions (intended to force foreign firms to comply with a state’s policies through penalties and restrictions) to make European firms comply with U.S. policy goals. The E.U. fought back, pursuing a complaint via the World Trade Organization and enacting a statute that forbade E.U. companies from complying with U.S. sanction legislation.
The E.U. became more cooperative during the Obama administration, cooperating with U.S. sanctions intended to bring Iran to the negotiating table, cutting Iran out of the Belgium-based SWIFT financial network and stopping the purchase of much of Iran’s oil. Such costly cooperation represented a dramatic policy shift for the Europeans, but substantially increased the pressure on Iran’s economy.
Many European companies chafed at the burden of Iran’s sanctions. E.U. member states pushed hard for the 2015 Joint Comprehensive Plan of Action (JCPOA) that would seek to ensure that Iran would not acquire nuclear weapons in return for international sanctions relief. Whereas the United States has continued to maintain a wide range of sanctions in place against Iran (although it has dramatically cut back on secondary sanctions), the E.U. lifted many of its sanctions against Iran in early 2016, and European companies are pursuing Iranian business opportunities. There is little support within Europe for reinstating robust sanctioning efforts against Iran.
America has returned to unilateralism – thanks to Congress, not Trump
This helps explain why the E.U. is unhappy about CAATSA. Instead of building consensus with the E.U. on jointly acceptable sanctions policies, CAATSA empowers the executive branch to impose secondary sanctions against foreign firms that undercut the United States’ unilateral sanctions against Russia. Notably, CAATSA is not a product of the Trump administration, which only grudgingly agreed to it. Instead, it reflects the desires of Congress.
Unsurprisingly, foreign governments resent the use of secondary sanctions that try to force their firms to comply with U.S. sanctions policies irrespective of their home governments’ policies. Foreign firms loathe secondary sanctions, which can put them in legal peril and disrupt lucrative commercial opportunities. The use of secondary sanctions against E.U. member states is particularly sensitive, as the United States’ aggressive application of such measures against the E.U. in 1990s almost sparked a trade war.
These secondary sanctions are especially sensitive since the sanctions effort against Iran increased European dependence on fossil fuel imports from Russia, which is currently the E.U.’s largest supplier of crude oil. Hence, the E.U. faces substantial limitations on how much it can afford to cooperate with the U.S.-led efforts to sanction Russia, particularly in the energy sector, because of the past cooperation it provided in sanctioning Iran. While the E.U. has been able to find additional export markets for goods it had normally traded with Russia, finding new energy partners is unlikely given the domestic instability in Libya and declining oil output by Norway and Britain.
European complaints are likely to get more vocal
U.S. policymakers cannot hope to obtain robust cooperation from the E.U. in sanctioning Iran and Russia at any point in the near future. Rather than convincing E.U. states to get on board with U.S. sanctioning efforts, CAATSA places E.U. leaders on the defensive about why they should continue to cooperate with — rather than fight back against — U.S. sanctions policies.
Germany, for example, has been vocal in its criticism of CAATSA. In an op-ed in the Wall Street Journal, the former German ambassador to the United States Wolfgang Ischinger warned that “the Transatlantic approach” that characterized U.S.-E.U. relations was breaking down. E.U. officials have also voiced concerns, suggesting that secondary sanctions — which might disrupt key projects like the Nord Stream 2 gas pipeline — might damage future E.U.-U.S. cooperation. Not only is the E.U. unlikely to cooperate, but if the United States aggressively enforces CAATSA’s secondary sanctions against E.U. firms, E.U. policymakers may be driven to actively resist the sanctions or retaliate in response to protect their firms and preserve their members’ energy security.
Sanction unilateralism may thus be self-undercutting, since research shows that even one sanctions-busting country can make it much harder for U.S. sanctions to succeed. Many European countries could look to buck U.S. preferences. Greece, Italy, Spain and Portugal would prefer to see sanctions against Russia and Iran relaxed or rolled back completely. Germany has strategic and economic interests in completing the Nord Stream pipelines and is entangled in energy deals with Russian companies. If the E.U. no longer requires its members to cooperate with U.S. sanctions against Russia, E.U. firms will rush to exploit the commercial opportunities created by the U.S. sanctions and undercut any possibility that the sanctions might be effective.
The period of close cooperation on sanctions policies that the United States and E.U. engaged in during the Obama administration could thus be ending. CAATSA may worsen European countries’ increasing reluctance to impose costly sanctions and reignite the hostility that marked the transatlantic relationship over sanctions in the 1990s. Moving forward, U.S. policymakers should not expect much support from Europe for a reinvigorated sanctions regime against Iran if they scrap the 2015 nuclear deal.
Bryan R. Early is an Associate Professor of Political Science at the University at Albany, SUNY and the Director of the Center for Policy Research. His book Busted Sanctions: Explaining Why Economic Sanctions Fail (Stanford University Press, 2015) provides the first comprehensive explanation of how and why countries around the world undercut U.S. economic sanctions.
Keith Preble is a PhD student in Political Science at the University at Albany.