July 9, 2014 | Business Insider
European Courts Are Gutting Iran Sanctions Before A Nuclear Agreement Has Even Been Reached
Co-authored by Saeed Ghasseminejad
Negotiators working to solve the diplomatic impasse over Iran’s nuclear program have not yet managed to find common ground with Tehran. But there are signs that the EU's sanctions regime is fracturing, putting Iran well on its way towards weakening Western leverage in the ongoing talks in Vienna.
America and the EU have built an impressive architecture of sanctions targeting Iran’s economy and the entities Iran relies upon to support its proliferation efforts. Sanctions are America and Europe’s biggest trump card in the negotiations. But a string of legal challenges by Iran and Western tactical mistakes are undermining them. As a result, economic pressure may subside well before Iran makes the necessary concessions for a good agreement to emerge.
Only last week, European courts ruled that the EU lacked evidence to keep Sharif’s University of Technology (SUT), the National Iran Tanker Company (NITC), and Babak Zanjani’s Sorinet group on a list of sanctioned Iranian entities. All entities remain under U.S. sanctions.
SUT’s collusion with the regime on nuclear procurement is so well-documented. It beggars belief that the EU could not prove its argument or the court would not listen. As Iran’s leading scientific institution, SUT has been intertwined with Iran’s nuclear and ballistic missiles programs for decades, routinely serving as a front for technology procurement.
Japan, the U.S., and the EU have targeted SUT as a whole, along with several of its departments, for its role in proliferation activities. Its talented students are sought after by Iran’s Revolutionary Guards, the custodians of Iran's nuclear and ballistic missile programs. This is not surprising. Numerous officials who sit on governing boards of SUT are former veterans of the IRGC, and there's plenty of expertise available at Sharif in fields like aerospace engineering and other hard sciences.
NITC should also remain on the EU list. The leadership of the NITC recently privatized the company in an effort to shield it from sanctions. In reality, ownership was transferred to state-owned or state-controlled entities such as Iran’s Social Security Investment Company (SSIC), and the Iran Oil Industry Pension Fund. Government control over NITC is still very much intact.
The case of Babak Zanjani is even more puzzling, given that Mr Zanjani – now in jail in Iran – has publicly taken pride in his role in helping the regime circumvent oil sanctions. Iranian authorities arrested him for profiteering from his sanction-busting work. His alleged Turkish-based lieutenant, Reza Zarrab, is at the center of an unprecedented corruption scandal in Turkey involving gold transfers to Iran in order to elude financial sanctions.
Yet, none of this appears relevant to the EU judiciary.
Judges have previously struck down EU sanctions because of insufficient evidence. Iran’s lawyers demand to see proof of their clients’ particular circumstances; out of fairness, judges are reluctant to grant the EU the privilege of withholding the evidence from the defendants. The EU member states that supply classified evidence for sanctions are not willing to let the EU legal team show the material in court for fear of compromising intelligence sources inside Iran.
Iran’s “lawfare” thus pays off. Dozens of Iranian companies have now won favorable decisions. Unless the EU can produce compelling evidence to reverse these judgments, the EU judiciary will soon delist Iranian entities such as SUT and NITC that the regime has repeatedly used for its nefarious purposes.
Such legal victories also serve the regime’s rhetoric about the sanctions’ injustice. They also undermine sanctions at a time when both the EU and the U.S. — keen as they are to see diplomacy succeed — are reluctant to fight Iran outside the court room.
In the past, the EU could have abandoned its targeted approach against specific Iranian companies. It could = instead have imposed blanket sector bans against Iran’s economy, just as the U.S. has already done.
But now, with diplomacy under way and a commitment not to impose new sanctions under the interim agreement signed in Geneva last November, judicial delisting of Iranian entities potentially constitutes a serious threat to the process. Iran’s legal challenges will erode existing sanctions. Interim agreement commitments will prevent the EU from compensating for the legal setbacks. And a reluctance to antagonize Iran during negotiations will prevent the EU from using existing sanctions for new designations.
Since the interim agreement was signed last November, neither the EU nor the U.S. have used existing measures to target new Iranian companies with ties to proliferation activities, like the hundreds of companies controlled by the IRGC. Iran, in short, got a pass from its diplomatic interlocutors and an assist from the EU's judicial system.
The results are predictable. Coupled with the modest economic recovery Iran recently enjoyed thanks to sanctions relief, these measures have weakened Western leverage. Iran can now weather the storm and outwit its negotiating partners.
As an extension for the Geneva agreement looms on July 20th, the EU and the U.S. should reconsider their stance — or they will see their ability to impose a favorable deal fritter away.
Emanuele Ottolenghi is a Senior Fellow at the Foundation for Defense of Democracies. Saeed Ghasseminejad is a Ph.D. Candidate in Finance at City University of New York. Follow them on Twitter at @eottolenghi and @SaeedGhassemine