In the first six months of 2019, the value of European Union imports from Iran decreased by 94 percent in comparison with the same period in 2018, according to Eurostat. The oil trade has suffered the most: In 2019, EU countries have not imported any oil from Iran. These figures indicate that European companies are complying with U.S. sanctions despite efforts by European governments to establish an alternate payment system aimed at circumventing them.
In the first half of 2018, EU countries imported 6.1 billion euros in goods from Iran, but in 2019, the number plummeted to 384 million euros. Purchases by the EU’s top five importer countries in the first half of 2018 – Italy, Spain, France, Greece, and the Netherlands – all fell sharply.
Italy and Spain reduced their imports from Iran by 95 and 97 percent, respectively. Still, they remained in the top five importers for the first half of 2019, joined by Germany, Belgium, and Romania.
A few countries – Latvia, Estonia, Bulgaria, Cyprus, Romania, and Denmark – increased their imports in the first half of 2019, but the extent of their trade with Iran is negligible. The countries which imported the most were Romania and Bulgaria, which imported only 22 million and 19 million euros worth of goods, respectively.
Meanwhile, the EU’s data for the first half of 2019 show a 54 percent decrease in exports to Iran compared to 2018’s first half, from 4.6 billion euros to 2.1 billion euros.
The staggering decline of trade is primarily the result of U.S. sanctions on Iran’s oil exports, the lifeblood of the country’s economy. In 2018, EU countries imported 8.2 billion euros of crude oil from Iran, constituting 88 percent of the EU’s total imports from Iran that year.
Thus, the EU’s imports from Iran this year have consisted primarily of non-oil goods that are not subject to U.S. sanctions, including fruits, vegetables, food, carpets, and pharmaceutical products.
Nevertheless, EU countries still import some sanctioned products. The United States imposed sanctions on Iran’s automotive industry in August 2018, but between August 2018 and June 2019, EU countries imported 5 million euros in vehicles, parts and, accessories.
In November 2018, the United States also designated Iran’s petrochemical industry, the country’s most lucrative sector after oil. Yet between November 2018 and June 2019, EU countries imported 97 million euros in plastic materials from Iran, 59 million euros of which was polyethylene. In the first half of 2019, imports of polyethylene dropped only 9 percent compared to the same period in 2018.
Moreover, the data do not capture potential sanctions-busting via transshipment. For example, if Iran sends goods to a second country, such as the United Arab Emirates, and a European company then imports them as Emirati goods, the shipment would not show up in tracking data as an import from Iran.
U.S. sanctions, notwithstanding Iran’s efforts to circumvent them, have proven largely effective in cutting EU’s imports from Iran. Still, the United States should seek to plug any holes in the sanctions architecture by designating any company, no matter how small, that violates U.S. sanctions. In so doing, Washington can ensure that its maximum pressure campaign against Iran exacts the costs to compel Iran to reevaluate the costs and benefits of its malign policies.
A forthcoming FDD policy brief will analyze the EU’s exports to Iran in greater detail.
Saeed Ghasseminejad is a senior Iran and financial economics advisor at the Foundation for Defense of Democracies (FDD), where he also contributes to FDD’s Center on Economic and Financial Power (CEFP). Follow Saeed on Twitter @SGhasseminejad. Follow FDD on Twitter @FDD and @FDD_CEFP. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.