Relations between the European Union and Iran, already put to the test in recent years, have reached a new low in the context of the Israel-Hamas war. Iran’s financial backing and training of Hamas terrorists, and the EU’s staunch support of Israel’s retaliation on Gaza, even with mounting evidence of war crimes, are driving Tehran and Brussels further apart.  

Bilateral relations have been on a downward trajectory since the US’s unilateral withdrawal from the Iran nuclear deal in 2018, and the EU’s failure to carry forward the deal – bartering sanction relief for curbed nuclear weapons development – without Washington’s lead. Since then, Iran has increasingly drifted away from the West, forging stronger alliances with China and Russia, actively supporting Putin’s full-scale war on Ukraine.  

Amid these geopolitical tensions, Jina Mahsa Amini’s death in police custody in September 2022, after being arrested for allegedly violating Iran’s forced veil law, and the huge country-wide protests that the theocratic government forcibly repressed, sparked a wave of indignation among the European public towards Iranian leaders. Some EU voices have claimed that this incident and ensuing discontent across the EU fortified its decision to limit engagement with Iran and impose sanctions.  

Given these challenges, the prospect of engaging in meaningful dialogue with Iran appears slim. Yet seeking avenues of cooperation with Tehran is vital, now more than ever, for nuclear non-proliferation, and European and regional stability.  

Failed nuclear brokerage  

In 2015 the EU’s relationship with Iran seemed to be heading in a positive direction. The E3/EU+3 countries (France, Germany, the United Kingdom, Russia, China, and the US) had just reached a landmark agreement with Iran: the Joint Comprehensive Plan of Action (JCPOA). The plan, commonly known as the Iran nuclear deal, sets out limitations on the Middle East country’s nuclear programme, aimed at guaranteeing it remains peaceful, in return for lifted UN, EU, and US sanctions from several economic sectors, including key trade in Iranian oil.   

A decade of diplomatic effort, led by the EU’s High Representative, went into establishing the JCPOA. It marked an important victory for the EU’s multilateral negotiations. However, the deal took a blow when the US, under Donald Trump’s administration, withdrew in 2018. Trump argued that its structure was “decaying and rotten” and could not prevent “an Iranian nuclear bomb”. 

The then US president urged EU signatories to follow suit, but they refused. Instead, EU foreign ministers committed to preserving the JCPOA. This showcased the EU’s ability for independent regional policy shaping, setting an important precedent.  

The EU proceeded to adopt some remedial measures, demonstrating its commitment to Iran. It updated its blocking statute, which overrules the law of a foreign jurisdiction: in this case, prohibiting European companies from complying with US sanctions imposed on Iran that violated the JCPOA. It also created a special purpose vehicle (SPV), a financial mechanism to enable trade between Iran and European companies, bypassing US sanctions.  

However, the EU’s efforts to ease the economic pressure on Tehran did not yield the expected results. Despite the statute, European companies largely abandoned their plans in Iran. In 2018, German car manufacturer Daimler halted operations in Iran to avoid being barred from the US market. French carmakers PSA and Renault, as well as Airbus, reacted similarly, defying EU leaders and their efforts to keep business ties with Iran open. 

The EU’s requests for the US to rejoin the nuclear deal went unanswered for years, making the Union appear less influential. It wasn’t until 2021, when the Biden administration took over, that the US showed an openness to possibly returning to the JCPOA. Despite EU mediation, efforts collapsed in March 2022 due to mutual accusations between the US and Iran, and Iran’s backing of Russia’s full-scale invasion of Ukraine. 

Iran dismisses the EU  

The EU’s failure to reengage the US in the nuclear deal and alleviate economic burdens left Iran dissatisfied. In 2019 Iran’s supreme leader, Ali Khamenei, contested the EU’s intentions with the deal, viewing the Union as an irrelevant antagonist. He asserted that, just like the US, the EU is deceitful and fuelled by animosity.  

Iran started to breach the JCPOA’s stipulations. In 2019 the UN nuclear agency confirmed that Iran had installed advanced centrifuges for enriching uranium. Its production of enriched uranium to concentrations higher than those agreed – up to 60 per cent purity, close to weapons grade – is growing.  

Bypassing the EU, Iran has opened indirect bilateral talks with the US. In September 2023, the two stakeholders agreed on a prisoner swap: five people were exchanged on each side. This followed the release in June 2023 of a Danish national and two Austrian citizens. Several European citizens are still being detained in Iran, including a Swedish diplomat, detained in 2022 on alleged espionage charges. Alongside the prisoners, Washington simultaneously released six billion dollars of frozen Iranian assets but retracted the funds after Hamas attacked Israel. 

Current unrest in the Middle East is deepening mistrust between Iran and the West. While the West sees Iran as a supporter of terrorist organisations and regional instability, Iran’s suspicion of the West – rooted in the US and European powers siding with Iraq in the Iran-Iraq war of 1980-1988 – is being rekindled by unwavering Western support for Israel. 

Iran’s breach of the JCPOA could have far-reaching consequences. Saudi Arabia has already announced that, if Iran acquires nuclear weapons, it would too. If Turkey and Egypt follow suit, this could lead to a nuclear arms race in a highly volatile region.  

Iran’s nuclear advancements may still be reversible, but the EU faces a narrowing window in which to revive the JCPOA. The Union may need to shift from sanctions to incentives, as Iran has started forming strategic partnerships with other world powers.  

Finding partners elsewhere  

Frustrated by the West’s unreliability and retracted promises, Iran has sought new partners. After facing decades of heavy US and EU economic sanctions, Iran is now orienting itself towards countries facing similar challenges – namely Russia and China. This shift further complicates its relationship with the EU, as Iran becomes increasingly less interested in dialogue.  

Following Russia’s full-scale invasion of Ukraine in 2022, Iran was one of the few countries officially siding with Russia. Since then, their partnership has expanded, with Iran becoming a crucial player in Russia’s persistence, supplying combat drones used to target key infrastructure such as power grids and radar stations. 

Iran’s support, prolonging the conflict, aimed at enabling a potential Russian victory, poses a direct security threat to European countries. The partnership between Moscow and Tehran could also shift the balance of power in the Middle East, as Russia may support Iran’s nuclear ambitions. In addition, Russia and Iran are strengthening economic and energy ties to counter Western sanctions. For instance, they have connected their interbank communication and transfer systems, facilitating trade and financial transactions, bypassing the SWIFT system.  

Iran has also deepened its ties with China having signed a 25-year cooperation programme in 2021. The agreement, outlined in a 2019 draft, involves a 400-billion-dollar Chinese investment in Iran’s economy in exchange for a steady and heavily discounted oil supply. China welcomed Iran into the Shanghai Cooperation Organisation (SCO) in 2023. Trade between Iran and SCO countries, which surpassed 651 billion dollars by 2021, is expected to increase further. Iran joining the SCO has strengthened its resilience against Western sanctions, providing leverage in negotiations, access to markets, and investment opportunities.  

Iran has also been invited to join the BRICS (Brazil, Russia, India, China, and South Africa) bloc of emerging economies. It will become a full member in January 2024, alongside Saudi Arabia, Ethiopia, Egypt, Argentina, and the United Arab Emirates. BRICS will then represent about 46 per cent of the world’s population and around 37 per cent of global GDP (purchasing power parity).  

Joining BRICS will open trade opportunities for Iran and align it with like-minded nations facing Western pressures. BRICS discussions on de-dollarisation and a common currency, though in their early stages, could impact global financial dynamics. Membership in SCO and BRICS will enhance Iran’s global image, elevating it to the status of emerging nation.  

Where does that leave the EU on Iran?  

Internationally, Iran is rebranding; domestically, the Islamic regime faces rising dissent. The regime’s violent crackdown on mass protests, sparked by Mahsa Amini’s death, including arbitrary executions and torture, has intensified the population’s desire for change. A Gamaan Institute survey of 116,000 participants in the country at the end of 2022 revealed that about 80 per cent of Iranians would prefer a democratic government over the Islamic Republic. 

Through its 2021-2027 Multiannual Indicative Programme (MIP) for Iran, the EU supports civil society organizations (CSOs) in areas like culture, tourism, and education. The EU could strengthen its contribution to empowering Iran’s civil society by creating a CSO Country Roadmap. Potential areas for deepening cooperation include gender equality and youth empowerment. However, to collaborate with Iranian non-profits, the EU must maintain a dialogue with the Iranian government and not bypass it.  

During the 2022 protests, when the EU expressed support for demonstrators, the Iranian government advised the Union and the US against “opportunism and instrumentalisation of human rights”, citing abuses within their own borders. If Iran’s concern persists, it may impede EU funding and support for Iranian non-profits, which would ultimately have a negative impact on Iranian citizens and their rights. For now, however, the EU seems committed to engaging with the Iranian government as per the 2016 Joint Statement.  

Relations could be enhanced if the EU prioritises newer avenues of collaboration, like climate cooperation, included in the MIP. Iran’s interest in joining the Paris Agreement, contingent on lifted sanctions, provides an opportunity for EU support in climate initiatives while working to ease key sanctions. 

The current Israel-Palestine crisis also provides a backdrop for cooperation. Despite Iran’s historical opposition to a two-state solution, the EU must respect Iran’s regional significance and engage in dialogue. The only durable solution for Palestine is one acceptable to Iran. So far, the EU has done the opposite: it has kept Iran out of ongoing discussions. A turnaround is needed: the EU has to engage Iran on the matter and encourage the US’s involvement as well.  

Acknowledgement of the profound impacts of Iran’s shifting alliances, notably with China and Russia, on the global political and economic landscape is imperative for the EU. As these alliances steer Iran away from Western engagement, the EU must persist in building a counter initiative of goodwill, dialogue, and partnerships with Iran.