President Trump’s withdrawal from the Iran deal | Brunswick Group

President Trump’s withdrawal from the Iran deal

The possible outcomes after President Trump's actions on the Iran deal

President Trump’s recent decision to withdraw the United States from the Iran nuclear deal has precipitated a transatlantic crisis that may be worse than the last rift over the Iraq War: while both had serious consequences for the stability of the Middle East, this crisis pits a unified Europe (internally divided during the Iraq War) against the United States, erodes multilateral non-proliferation efforts and follows highly divisive U.S. threats to impose steel and aluminium tariffs, as well as the decision to pull the United States out of the Paris Climate Accords. It is a matter of particular irritation that the White House ignored repeated pleas by many allies to remain in the Iran nuclear deal and that it withdrew without contradicting repeated assessments by the International Atomic Energy Agency (IAEA) that Iran has been complying with the deal’s terms.

Explanatory documents released by the U.S. Treasury on the date of the decision clarify the consequences of the decision. All the sanctions on Iran that were relaxed under the Iran nuclear deal will be re-imposed.

  • As of August 6, certain sanctions will re-enter into force, including: sanctions on Iran buying or acquiring U.S. dollars; sanctions on Iran trading gold and other precious metals; sanctions on Iran’s sale, supply or transfer to or from Iran of certain metals, graphite, coal and software; sanctions on “significant” sales or purchases of Iranian rials; sanctions on certain transactions relating to Iranian sovereign debt; and sanctions on Iran’s automotive sector.
  • As of November 4, other sanctions will re-enter into force, including: sanctions on Iran’s ports, as well as the country’s shipping sector; sanctions on buying petroleum and petrochemical products with a number of Iranian companies; sanctions on foreign financial institutions transacting with the Central Bank of Iran and other Iranian financial institutions; sanctions on the provision of specialized financial messaging services to the Central Bank of Iran and other Iranian financial institutions; sanctions on the provision of underwriting services, insurance or reinsurance; and sanctions on Iran’s energy sector.

So, what happens now? The UK, France, Germany and the European Commission (all co-signatories), have pledged to do everything they can to keep the Iran nuclear deal alive without the United States. They are seeking to convince the Trump administration to agree to carve-outs that will insulate European companies from the sanctions.

This is rather unlikely because they would diminish the impact of the sanctions (the whole point of the exercise being to maximize pressure on Teheran to agree to even more onerous restrictions on its nuclear program, as well as its ballistic missile program), and it would put European businesses at a competitive advantage to U.S. businesses.

The four co-signatories are also seeking to convince Teheran to continue respecting its obligations under the deal; but that also seems rather unlikely as it will no longer get “the benefit of the bargain” when U.S. sanctions will not only prohibit most U.S.-Iran transactions, but in addition may well severely constrain Europe-Iran transactions. Moreover, Iranian hardliners who opposed the deal from its inception will probably be empowered. The risk is that Iran will restart its nuclear program, but this time without the IAEA’s “eyes and ears” on the ground to monitor activities.

The European Commission has been busy modifying the “blocking statutes” that it threatened to impose in the mid-1990s when the United States sought to penalize foreign companies trading with Cuba, Iran and Libya. These statutes would ban any EU company from complying with U.S. sanctions and would invalidate court rulings enforcing U.S. penalties. EU government leaders are expected to take a final decision at their summit in Sofia on May 17 about whether to impose the statutes.

In the mid-1990s the EU did not have to do so because Washington eventually backed down. But in light of Washington’s likely unwillingness to back down this time round, the EU will be faced with the tough question of how to make these statutes work as intended.

That will not be easy: European companies with business exposure to the United States will remain vulnerable; and the wide reach of the U.S. financial system (especially the role of the U.S. dollar) will, at best, ensure that many transactions with Iran will remain very complicated to structure. To compensate for those European businesses that would be dissuaded by U.S. sanctions from Iranian transactions – despite EU blocking statutes – and incentivize Iran to stay in the deal, the EU is likely to facilitate euro-denominated loans, including from the European Investment Bank, and member states may decide to provide greater export credit enhancements.

While the political, business and legal aspects of the Trump administration’s decision to withdraw from the Iran nuclear deal are still rather unclear, one thing is certain: transatlantic relations will become more turbulent and multinational businesses – not only those with exposure to Iran – will be subject to an increasingly risky environment.


Anthony Gardner is a Senior Adviser at Brunswick Group and its Geopolitical offer, based across our London and Brussels offices. Anthony was previously the US Ambassador to the EU 2014-2017. These notes are his personal views.

William Medvei, a Brunswick Group Director in the London office and specialist on the oil & gas market, comments on the possible implications on the sector:

What do the sanctions on Iran mean for oil markets?

Much of the impact of sanctions on Iran had already been priced in to the oil market in the weeks running up to President Trump’s decision. Brent crude, the global benchmark, had risen over 10% in the month beforehand to reach $77/barrel the day after Trump formally announced he was abandoning the deal and re-imposing sanctions.

What happens next?

The first question to ask is what is the likely impact on oil prices in the long term. One of the key factors behind the strengthening oil price in the last six months has been the rapid loss of 0.5 million barrels a day of oil exports from Venezuela. With sanctions on Iran likely to reduce global supplies by a further 0.5 million barrels a day (even with China set to ignore the ban on importing Iranian crude) much will depend on the ability of shale producers in the USA and Saudi Arabia to respond by opening the taps. This will be crucial in order to meet global oil demand which, according to Wood Mackenzie, will hit over 100 million barrels a day later this year – without that supply response oil prices are likely to spike much higher.

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