Russia and the US play the blame game

Russia and the US play the blame game

Russia and the US play the blame game

Written by Ian Bond, 18 December 2014
From The Moscow Times

Facing new opportunities in Europe?

New opportunities?

Facing new opportunities in Europe?

Written by Yehuda Ben-Hur Levy, 17 December 2014
From The Jerusalem Post

EU doet er goed aan om de relatie met Turkije op peil te houden

EU doet er goed aan om de relatie met Turkije op peil te houden

EU doet er goed aan om de relatie met Turkije op peil te houden

Written by Rem Korteweg, 16 December 2014

EU-Israel relations: Confrontation or co-operation?

EU-Israel relations: Confrontation or co-operation?

EU-Israel relations: Confrontation or co-operation?

Written by Yehuda Ben-Hur Levy, 18 December 2014

For the last decade, relations between the EU and Israel have been strained by tension over the Middle East peace process, but strengthened by intensive scientific and economic co-operation. So far, confrontation has not crowded out collaboration, but with the EU’s decision to get tougher on Israel’s settlements policy, this may change. Both Israel and the EU will need to find a balance between their disagreements over the settlements and the beneficial economic and scientific co-operation. They can take a number of steps in order to achieve this.

The positive aspect of the relationship is not often recognised. Economic and research links between the EU and Israel are strong. In 2013, the value of EU-Israel trade was €29.5 billion (equal to 13.7 per cent of Israel’s GDP), with €12.5 billion imports to the EU and €17 billion exports to Israel. The EU is Israel’s main trading partner, accounting for one-third of its total trade. Large Israeli corporations have sizeable investments in Europe and employ many Europeans, while Israel, despite its small size, is one of Europe’s most important trading partners in the Middle East. It supplies Europe with high-tech products, including software and apps used in most PCs and smartphones, medical devices, chemicals and pharmaceuticals (Israel’s TEVA is one of the most important sources of generic medicines for Europe).

Beyond trade, Israel and the EU have been collaborating in fields such as agriculture, aviation, science and in a wide variety of R&D fields (including nanotechnology, health, environment and communications). Israel participated in the latest EU R&D Framework Programme (FP7) and in June 2014 it joined the EU’s research and innovation programme, Horizon 2020, and will contribute to its budget. Hundreds of leading Israeli institutions have received EU funding for innovative research, in many cases sharing their expertise and knowledge with their European counterparts.

There are also defence ties: Israel conducts joint military exercises with Bulgaria, Greece and Italy, while some EU member states, including Germany, the UK and Italy trade defence goods and services with Israel. In addition, Israel’s intelligence agencies and their European counterparts (among them agencies in the UK and Germany) collaborate closely.

But alongside that co-operation, political tension, rooted in the Israeli-Palestinian conflict, is increasing. Issues such as the political status of Jerusalem, human rights, the humanitarian situation in Gaza and EU funding for left-wing NGOs in Israel have been troublesome.

The EU and Israel also disagree on the timetable for peace. While many European leaders believe that now is the moment to push for an agreement, Israeli politicians often stress the current instability in the Middle East. Moreover, Israelis remember the 2005 withdrawal from Gaza and fear that leaving the West Bank will only lead to a ‘second Gaza’ under Hamas rule or turn it into fertile ground for jihadist movements.

The issue of Israeli settlements in the West Bank undoubtedly casts the longest shadow. European leaders criticise new houses and neighbourhoods built beyond the 1967 borders. They fear that Israel’s actions undermine the territorial integrity of a future Palestinian state, thus making it harder to achieve a two-state solution. Many Israeli politicians, on the other hand, argue that the real obstacle for peace is not the settlements policy but rather the absence of a credible Palestinian partner who is willing to compromise.

Since 2012, the EU’s attitude towards Israeli settlements in the West Bank has become more assertive. This is reflected both in rhetoric and policy. For example, recent statements issued by the European External Action Service (EEAS), say that the settlements “constitute an obstacle to peace” and “question Israel’s commitment to a peaceful negotiated settlement”.

In practical terms, the EU has published strict new guidelines for EU grants, preventing Israeli entities located in the West Bank from receiving EU funding. Additionally, the EU no longer recognises Israeli veterinary services in the West Bank, which in practice prevents the export of dairy and poultry products from settlements to Europe. According to media reports, EU officials are considering applying additional ‘sticks’ in the future if construction continues, among them labelling Israeli products produced in the West Bank and requiring visas from Israeli settlers.

While these European policies are limited in scope, they damage the dialogue between Israel and the EU, especially with a right-wing Israeli government. They may also discourage bilateral co-operation in other areas. Last year’s negotiations on Israel’s participation in the Horizon 2020 programme shows how things can snowball.

During the negotiations, the EU wanted to ensure that European funds would not reach Israeli institutions located in the West Bank, East Jerusalem or the Golan Heights. The Israeli newspaper Haaretz reported that tough meetings took place within the Israeli government; some ministers supported signing the agreement, among them Finance Minister Yair Lapid, while Foreign Minister Avigdor Lieberman and his deputy Ze’ev Elkin argued that Israel should not participate in the programme. They felt that by signing, Israel would de facto acknowledge that the settlements were illegal. For his part, Prime Minister Benjamin Netanyahu raised the possibility of attracting alternative funds from Asia and North America in order to compensate Israeli research institutions.

What started as a discussion about access to Horizon 2020 funds soon became a political argument, creating tensions that had the potential to damage fruitful scientific collaboration. Israel’s academic and research institutions could have lost millions of euros in research grants, as well as access to European knowledge and markets. The EU would have lost one of its most innovative and successful scientific partners.

The Israeli media give more coverage to such disagreements than to co-operation with Europe. Israeli politicians, academics and diplomats have accused the EU of dealing with Israel unfairly, by only pressuring Israel for concessions, and of not understanding the mentality of the Middle East. Furthermore, the increasing number of anti-Semitic incidents across Europe and boycott campaigns in European universities and companies receive significant media attention in Israel. Although these incidents are often condemned by European leaders, they reinforce Israeli mistrust.

The case of Horizon 2020 however, also shows how tensions can be managed. Amid the crisis, prominent Israeli academics, including heads of Israeli universities, members of the Israeli Academy of Sciences and representatives from the Committee of the Council for Higher Education (the state body responsible for distributing higher education funding) repeatedly urged the government to sign the agreement; they were worried about the implications for Israeli research. This pressure eventually paid off. The Israeli government showed some flexibility and a diplomatic agreement was reached: EU regulations will be respected and funding will not flow to settlements, but Israel added an annexe to the agreement stating that it disagrees with the EU’s legal position concerning the settlements.

Other parties can also play a role in calming tensions and preventing future rows about EU policy towards Israeli settlements from damaging collaboration. First, high-tech and medical businesses in Europe and Israel should speak up in times of political friction about the direct benefits they get from a good relationship.

Second, the EU’s representatives have to voice more clearly what they are trying to do. The EU’s guidelines and demands concerning Horizon 2020 were portrayed by some Israeli commentators as part of a ‘European boycott’; but in fact the EU made a legitimate decision not to fund organisations in Israeli settlements in the West Bank, which violate international law. The EU should make clear that, in areas of productive co-operation where there are not the same legal issues, it will do its best to maintain the relationship. It should emphasise the positive contribution that the EU brings to the daily lives of Israelis. For instance, the EU-Israel ‘open sky pact’ reduces the prices of airline tickets for Israelis; its funding for institutions based within the 1967 borders boosts Israeli research and jobs; and the EU-Israel free trade agreement has a positive effect on Israel’s market.

Third, Israeli and European politicians should focus on quieter, pragmatic dialogue, rather than play to the crowd. Member-states, the Commission and the EEAS all have a role to play in managing the relationship and talking frankly about disagreements. Federica Mogherini’s first visit outside Europe as High Representative for Foreign Policy was to Israel and the Palestinian territories. She stated that she intended “to use the Union’s political potential in this region”, which suggests that she plans to continue (or even deepen) the dialogue and the EU’s involvement. Israeli senior politicians should commit to doing the same.

These tools should allow both parties to manage some of the tensions and hostility that have emerged in Israel as a result of the EU’s stance on the settlements. In the long run, however, without meaningful progress in the Middle East peace process, and with more settlements under construction, the EU may be tempted to be tougher. This could translate into more restrictions on Israeli entities located outside the 1967 borders. The longer the status quo remains, the greater the chances of such EU actions. This should be cause for alarm, particularly in Israel. Although the benefits of the relationship are mutual, they are not symmetric; Israel is much more reliant on Europe than vice versa. Turning a deaf ear to Europe’s complaints could be a costly mistake for Israel’s leaders.

Yehuda Ben-Hur Levy is a Clara Marina O'Donnell fellow at the Centre for European Reform.

Tusk bulks up EU Russia response with pro-US worldview

Tusk bulks up EU Russia response with pro-US worldview

Tusk bulks up EU Russia response with pro-US worldview

By Ian Bond, 11 December 2014
From Bloomberg

Link to press quote(s):

Judy Asks: Can Tusk boost EU foreign policy?

Judy Asks: Can Tusk boost EU foreign policy?

Judy Asks: Can Tusk boost EU foreign policy?

Written by Ian Bond, 03 December 2014
From Carnegie Europe

Treacherous sands: the EU and terrorism in the broader Sahel

Treacherous sands: the EU and terrorism in the broader Sahel

Treacherous sands: the EU and terrorism in the broader Sahel

Written by Rem Korteweg, 01 December 2014
From European View

Hungary and the West: We need to talk about Viktor

Hungary and the West: We need to talk about Viktor

Hungary and the West: We need to talk about Viktor

Written by Agata Gostyńska , Ian Bond, 26 November 2014

Prime Minister Viktor Orban still dominates Hungary’s political scene, in spite of recent large demonstrations in Budapest. But his political reforms and economic and foreign policies are raising more and more questions abroad as well as at home. If Orban thinks he can ignore such criticism, he is wrong: Hungary's economic development depends on its Western partners.

Worries about Orban’s intentions started soon after his election in 2010, when he quickly consolidated his Fidesz party’s grip on power, and purged political opponents from positions of influence. In 2011, German Chancellor Angela Merkel (among others) criticised measures to control the media; in 2012 the European Commission started infringement proceedings against Hungary for limiting the independence of the Central Bank and the data protection authority, and for compulsorily retiring 274 judges (who were replaced by more Fidesz-friendly figures).

But concerns about Orban have heightened recently as a result of two speeches. His inaugural speech to parliament in May, after his re-election, called for autonomy and 'communal rights' for ethnic Hungarians in neighbouring states, including Ukraine. It upset neighbours like Poland, where Prime Minister Donald Tusk suggested that it sounded too similar to Putin's line on ethnic Russians abroad. Orban’s speech to a gathering of Hungarian students in Romania in July 2014 caused even more trouble. In it, he proclaimed a shift from liberal democracy towards the construction of an “illiberal state" and cited Singapore, China, India, Russia and Turkey as models.

Does the reality of Orban’s policies live up to the rhetoric? Hungarians close to the ruling party argue that the rest of the West listens too much to Orban’s leftist political opponents. They claim that Hungary has been a reliable EU partner, whatever critics say. They point to Hungary’s successful presidency in 2011: it secured Croatian accession to the EU, and laid the foundations for the European Parliament’s involvement in the negotiations on the EU’s long-term budget.

Some foreign experts on Hungary suggest that however alarming the ‘illiberal’ label sounds, what Orban means is merely that the EU’s current approach to tackling the economic crisis is not working; and that the liberal model, which privileges the rights of the individual over the interests of the community, is one of the reasons for its failure. Orban, according to this interpretation, wants to build closer links with economically successful, albeit authoritarian states.

Even Hungarians who do not support Fidesz accept that some of the steps taken reflect a necessary if belated attempt to purge ex-Communists from positions of influence, where they could obstruct change and perpetuate the power of the Cold War-era nomenklatura.

Whether or not Orban’s motives were pure, the effect of his reforms has been to create strongly pro-Fidesz state structures, rather than a politically neutral administration. Murky links between business and politics have developed: in October the US government imposed visa bans on a number of officials, after repeated attempts to get the Hungarian authorities to tackle corrupt practices which favoured Fidesz-linked firms. And Orban has intensified pressure on civil society: in September police raided the Budapest offices of an NGO funded by Norwegian government grants, following Hungarian government allegations that it was funding Fidesz’ political opponents.

Economically, Orban has pursued populist policies, such as trying to reduce the role of foreign investors in key sectors. In September 2014 Deputy Prime Minister Zsolt Semjen said that nationalising the energy sector was the only way to guarantee security of supply for Hungarians, despite ample evidence that liberalising markets would work better. The government has also forced banks to take large losses in order to protect Hungarian borrowers against exchange rate fluctuations, and seems poised to buy up the assets of any banks that leave the Hungarian market as a result. In response, the Commission has expressed concern about Hungary's compliance with rules on state aid.

Orban might be able to thumb his nose at the Commission if his economic policies were a success. But from 2008-2013, Hungary’s GDP grew at the slowest rate in the Visegrad Group (which comprises Hungary, Poland, Slovakia and the Czech Republic and is often referred to as the V4).

The main victims of Orban’s domestic policies may be his own citizens, but his foreign and security policy could damage wider European interests. His statements often hint at a wish to revise Hungary’s borders, established after the First World War, which left Hungarian minorities spread across several neighbouring countries. His implicit encouragement of irredentism worries other countries, particularly Slovakia and Romania which have significant ethnic Hungarian populations. It also complicates co-operation within the V4.

As neighbours of Ukraine, the V4 should have been central to formulating the EU's response to Russia's annexation of Crimea and continued interference in the Donbass. The V4's experience of economic and political transition and of European integration should make them natural mentors for the new authorities in Kyiv. Instead, Orban has contributed to V4 disunity and questioned EU efforts to put pressure on Russia.

One European politician who has known Orban for many years suggests that his cultivation of Putin comes from a mixture of anger at the way other EU leaders treat Hungary and pure opportunism. Whatever the cause, Orban has tied his country closely to Russia, especially in the energy sector. In January 2014 he signed an agreement with Putin on expanding Hungary's Paks nuclear power station; 80 per cent of the project will be financed by a Russian state loan. In July, he restated his support for the South Stream gas pipeline from Russia to Europe (which would bypass Ukraine) – a project which the Commission has said is illegal in its current form.
And in September, after a meeting with Gazprom CEO Aleksei Miller, he halted the re-export to Ukraine of gas bought by Hungary; by doing so, he made Russia's cut of gas supplies to Ukraine more effective.

Though the US has loudly criticised Orban's democratic back-sliding and closeness to Russia, Brussels has more leverage with Hungary than Washington. What can the EU do with this awkward but democratically-elected man? So far, the member-states and the Commission have only grumbled, to little avail. As an organisation often criticised for its own lack of democratic legitimacy, the EU has hesitated to challenge someone who has a large majority in his national parliament.

If the political will to act exists, the EU has two types of tools it can use. First, the Commission can take action against a government which breaks European law and in the process goes against EU values. It allows the Commission to launch infringement proceedings. But such proceedings cannot address cases where a government acts contrary to the EU's values but does not break any specific EU law. In the case of the compulsory retirement of judges, the Commission based its legal action on EU rules against age discrimination in employment; but it had no standing to tackle more fundamental questions of the rule of law and independence of the judiciary. Hungary settled the case by compensating the judges but not reinstating them.

Second, the EU can address democratic shortcomings in a member-state through Article 7 of the Treaty on European Union, which enables the European Council to determine “the existence of a serious and persistent breach of EU values” in a member-state; and to suspend some of its membership rights, including voting rights. The European Council must decide unanimously (minus the country concerned) that a breach has taken place. Other countries would probably want to see evidence of much more serious misbehaviour than anything Orban has yet done before resorting to such a nuclear option.

Article 7 also has a ‘warning mechanism’: four-fifths of the member-states may determine that there is a clear risk of a serious breach of EU values in another member-state. This ‘yellow card’ permits a dialogue with the member-state in question before more radical steps are taken. But member-states are even afraid of using this mechanism. It would fuel debate about whether the EU should be able to interfere in the affairs of a member-state. It could also lead to an East/West split in the Council, if the Central Europeans believed that ‘old’ member-states were using Article 7 against them while overlooking failings in one of their own number. It is worth noting that in 2000, when Austria’s coalition government included the far-right Freedom Party, other member-states introduced political sanctions without using Article 7 that had been introduced by Amsterdam treaty and entered into force in 1999.

Doing nothing about Orban’s policies is not acceptable. He has challenged the EU’s role as the champion of democratic values, which was the basis of past enlargements and is the reason the EU has remained so attractive to countries like Ukraine. Inaction would weaken the EU’s power of example.

Some governments would like a proper debate about Hungary’s behaviour. In 2013 the German, Dutch, Danish and Finnish foreign ministers wrote to the Commission urging it to do more to promote respect for the rule of law in the EU. They proposed various measures to respond to breaches of EU principles that could be deployed before escalating to the use of Article 7. These ranged from political dialogue with the Commission about issues of concern to the suspension of structural funds (currently only possible if a country breaks the EU’s macroeconomic rules).

A majority of member-states have so far blocked proposals to enhance the EU’s role in policing the rule of law. Some, like the UK, fear that strengthening the Commission’s power would play into hands of eurosceptics; others, including in the Baltic States, worry that the EU would interfere with their policies towards national minorities. The General Affairs Council will revert to the issue of the rule of law in December, but there is no guarantee of progress. For the moment, therefore, more informal ways of handling Orban must be found.

The other members of the V4 have an important role to play. Some of them share Orban’s misgivings about sanctions against Russia; but they have developed a ‘brand identity’ as modern, successful European societies, and Orban’s populist nationalism threatens this reputation. They should work behind the scenes to shift Orban back into the liberal, market-oriented European mainstream.

British Prime Minister David Cameron should also speak up. Orban joined Cameron in his unsuccessful efforts to oppose the nomination of Jean-Claude Juncker as Commission President. Cameron’s views on the EU are sometimes compared with those of Orban. But unlike Orban, Cameron has been outspoken about the threat Putin's policies pose to Europe. Nobody has accused Cameron of trying to monopolise state institutions for the Conservative Party. Cameron could suggest that Orban join the UK in trying to reform and strengthen the EU, internally and externally, rather than chasing after illiberal democracies that have their own economic and political problems.

Perhaps the best hope is that other centre-right politicians in Europe can talk Orban round. He has benefited from the support of the European People’s Party (EPP), which unites most of the centre-right parties in the EU, including Fidesz. It is time for leaders like Angela Merkel of Germany or the new Polish Prime Minister, Ewa Kopacz, to remind Orban that almost 80 per cent of Hungary's trade is with other EU member-states, and that his main economic and political partners are still in the West, not in Moscow.

Agata Gostyńska is a research fellow and Ian Bond is director of foreign policy at the Centre for European Reform.

Putin slipper for nye sanktioner trods verbal lussing fra Merkel

Putin slipper for nye sanktioner trods verbal lussing fra Merkel

Putin slipper for nye sanktioner trods verbal lussing fra Merkel

By Ian Bond, 18 November 2014
From Politiken

Iran nuclear talks: Patience is a virtue

Iran nuclear talks: Patience is a virtue

Iran nuclear talks: Patience is a virtue

Written by Rem Korteweg, 13 November 2014

When negotiators from Iran and the EU3+3 (France, UK, Germany plus the US, Russia and China) reached an interim agreement in November 2013 restricting Iran's nuclear programme, they set themselves a one-year deadline for sealing a comprehensive, long-term agreement. That deadline expires on November 24th. Now Western governments have to decide whether negotiators should stick with the deadline or extend the talks. They should choose the latter; the current geopolitical context does not favour the West and, in time, low oil prices could force Iran to compromise.

On the face of it, a deal should be within reach. The main point of disagreement is the number of centrifuges – tools for enriching uranium – Iran should be permitted to have. The more it has, the faster it can enrich enough uranium to build a nuclear weapon. US Secretary of State John Kerry has said he wants to ensure Tehran cannot build a bomb in less than one year. So far the Iranian government has built 19,000 centrifuges and says it intends to build at least twice as many. But the US and others want to reduce the number to the low thousands.

Under the November 2013 interim deal, Tehran agreed to suspend its uranium enrichment activities, dilute some of its higher enriched uranium stock and halt work at three nuclear sites. It also agreed to allow increased monitoring by the International Atomic Energy Agency (IAEA), the international nuclear watchdog. In return, the US and the EU, which had restricted Iran’s ability to sell oil and natural gas through a tough sanctions regime, released several billion dollars in Iranian oil proceeds and allowed access to specific goods, including medicine and aircraft spare parts.

The ‘prize’ of a successful negotiation is containing the spread of nuclear weapons in the Middle East. A comprehensive agreement would bring a dose of badly needed good news to the volatile region, and make a US or Israeli military strike unlikely. A deal would show that multilateral diplomacy involving the West and Russia can solve thorny international issues even when relations are tense because of the Ukraine crisis.

Even a comprehensive deal would not make Iran a friend of the West. But it would reduce the level of animosity and offer the prospect of a pragmatic détente. There are a number of regional issues which would benefit from greater co-operation, such as the conflict in Syria, Iraq and the threat from the terrorist group ISIL (the Islamic State in Iraq and the Levant), and the stability of Afghanistan. A deal would also help to revive Iran’s economy, for example by attracting investment into Iran’s energy sector.

Under a comprehensive deal the West may have to tacitly accept that Iran has the technical potential to develop a nuclear weapon. But Iran’s leaders would need to dismantle or roll back parts of the country’s nuclear programme, allow invasive inspections, make credible offers of transparency and accept that sanctions could be reinstated anytime. As economic and geopolitical realities influence the negotiations, Ayatollah Khamenei, Iran’s Supreme Leader – and his president, Hassan Rouhani – may not see the need to compromise enough to achieve a deal.

The US and Europe are using economic sanctions, particularly against Iran’s financial and energy sectors, to extract concessions at the negotiating table. Iran’s economy has suffered as a result: according to the US State Department, it is 25 per cent smaller than it would have been if it had continued to grow at its pre-sanctions rate. The economy has been in recession, Iran cannot market most of its vast energy resources and foreign reserves worth more than $100 billion (€80 billion) are out of Tehran’s reach, mostly locked in Asian banks.

However, Iran has had some success in circumventing the sanctions. According to the Central Bank of Iran, the first quarter’s growth rate was 4.6 per cent over the same quarter in 2013. Unemployment has dropped, and inflation has come down from 45 per cent to 27 per cent. The bank argues that the Iranian economy may recover, even under sanctions. If President Rouhani can deliver growth through negotiated sanctions relief and sanctions busting, he will have less interest in compromising during the nuclear talks.

In 2014, Iran’s national oil company exploited a loophole in the sanctions regime; exports of natural gas condensates – a very light oil – are only partially restricted. The interim agreement caps Iranian crude oil exports at 1 million barrels per day. But according to the International Energy Agency (IEA), in 2014 Iran exceeded the export cap by nearly 400,000 barrels per day ‒ mostly in the form of condensates ‒ adding $3.3 billion to the Iranian treasury.

Iran is also trying to attract the interest of foreign investors. In October, President Rouhani publicly endorsed a business roundtable in London that discussed post-sanctions economic opportunities. Tehran is luring international energy companies to return by offering them more profitable conditions, even though sanctions would only be lifted after a comprehensive deal was reached.

At the same time, cracks are appearing in Europe’s sanctions edifice. A ruling by the European Court of Justice (ECJ) on September 18th, citing procedural mistakes, annulled some of the EU’s restrictive measures against the Central Bank of Iran. On October 7th, another ECJ ruling in favour of Iran’s national tanker company allowed its assets to be unfrozen. While the EU responded by putting the company back on its sanctions list, these rulings suggest more of the sanctions package could be legally unpicked.

Iran may also be decreasingly willing to compromise for geopolitical reasons. US-led efforts to target ISIL are strengthening Iran’s regional influence. ISIL is an adversary of Iran’s allies in Damascus and Baghdad, and the group has targeted Shia communities and their holy sites in Iraq. In response, Iran’s Revolutionary Guard Corps helped prevent the fall of Irbil in August and is training Shia militias. Meanwhile Iran continues to prop up President Bashar al-Assad and offer him military backing through its Lebanese proxy group, Hizbollah.

A rapprochement between the US and Iran seemed possible in the run-up to US airstrikes on ISIL in late August. But Iranian officials have tied co-operation against ISIL to American leniency on Iranian centrifuges. The United States has made the opposite linkage: President Obama reportedly told Ayatollah Khamenei that co-operation against ISIL depended on Iranian nuclear concessions. But Iran has more influence on the ground in Iraq and Syria than the US does, and Obama is under domestic political pressure to deliver results against ISIL, strengthening Iran’s hand in the talks.

The Ukraine crisis could also help Iran’s negotiating position. Western negotiators say that Moscow is not letting the conflict in Ukraine contaminate the talks. But Russian attempts to frustrate Western diplomacy have emerged. In the energy domain, Iran and Russia are competitors. Yet Tehran is flirting with Moscow, hoping to agree on an oil-for-goods swap, which would see Russia importing 500,000 barrels per day from Iran and sending Russian manufacturing and drilling equipment in return. If relations between the West and Russia become more strained, this arrangement could go ahead, undermining the sanctions regime and Iran’s incentive to make a deal.

The oil price is another reason why Russia may not want a deal now and could be advising Iran to hold out. Any nuclear agreement will raise the prospect of more Iranian oil exports, putting downward pressure on the oil price. This would further harm a Russian economy dependent on oil exports and hit by Western sanctions over Ukraine. (The oil-for-goods swap would make sense to Moscow as the agreement would keep Iranian oil off the international market, while Russia would pay in kind, leaving spot oil prices undisturbed).

Although a compromise may be out of reach at present, neither the West nor Iran has an interest in talks breaking down. The Obama administration has invested significant political capital in a deal and sees it as a possible foreign policy legacy. For the majority-Republican US Congress, however, failed negotiations would confirm that the administration's diplomacy needs to be replaced by a more muscular policy of harsher sanctions. A reluctant Obama would face new pressure to put a military option back on the table.

Collapsed negotiations and a tougher US approach would cause splits in the EU3+3. Russia and China would consider bilateral trade and energy deals with Iran, and European companies would push their leaders to take a softer stance on sanctions. The sanctions regime could unravel.

America’s regional allies have been sceptical about the interim agreement from the start. If diplomacy failed and Iran resumed work on its nuclear programme, Israel and Saudi Arabia in particular would take counter-measures. These might range from lobbying Washington to take military action, to (in the case of Israel) launching unilateral military strikes or (in the case of Saudi Arabia) pursuing a nuclear option itself.

For Iran, the collapse of negotiations would put pressure on President Rouhani from hardliners to accelerate a weapons programme. On the economic front, the re-imposition of sanctions, or further measures, would be painful. Politically, Rouhani would have to gamble either that international solidarity would crumble, or that America’s next president would be as willing as Obama to try to do a deal, while facing opposition from Congress and US allies in the Middle East.

So if, as seems likely, the November 24th deadline cannot be met, the interim agreement and the talks should be extended. Initially, this is in the interest of all parties. The Iranians would get the continued benefit of some sanctions relief without having made major concessions, and need not fear a military threat. The Americans and the Europeans would steer away from yet another Middle Eastern conflict and a deal would still be within reach. And Russia could continue to build its commercial ties to Iran, without risking nuclear proliferation along its southern borders.

Looking ahead, an extension should favour the EU3+3. Due to the serendipitous ‘fracking’ revolution, America’s geopolitical clout is growing. US oil is flooding the market (and Saudi Arabia too is keeping the spigot open). In combination with slowing Chinese demand for energy, oil prices are now at their lowest point in four years. The IEA expects growth in oil demand to slow in 2015 and the International Monetary Fund (IMF) has adjusted its growth forecast for China downward. It suggests oil prices will remain down. The oil price at which Iran’s budget is balanced lies between $120 and $130, while the current market price is roughly $75-80. Iran’s economic recovery could be short-lived as low oil prices hurt its bottom line and offset likely gains from sanctions busting. Even a Russian-Iranian oil-for-goods deal would not be sufficient to keep its economy afloat. President Rouhani recently hinted at Iran’s vulnerability to the price slump. The longer it lasts, the more pain it will cause to Iran’s economy. An extension of six more months would allow the oil price to do its work on Iran’s willingness to compromise in the nuclear talks.

A sceptical US Congress could still try to derail an extension by imposing new sanctions on Iran. A two-thirds majority in both the Senate and the House is required to block a presidential veto. The House is strongly opposed to the talks, but Obama should be able to convince enough senators to back an extension.

By designating Catherine Ashton as the EU’s mediator on Iran, after her term as High Representative expired, the EU has signalled it could live with an extension. But the EU and its member-states should ensure that the loopholes in the sanctions regime – for instance on natural gas condensates – are closed, that EU lawyers successfully defend the sanctions regime at the ECJ, and that European companies that circumvent sanctions are fined – something which until now Europe has left to prosecutors in the US.

A deal might still be struck this month, but the odds are that it will not. In that case, Americans and Europeans should use their economic leverage to get a better agreement later.

Rem Korteweg is a senior research fellow at the Centre for European Reform.

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