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EU: Push For Trade Agreement With Iran Stalls, But Unlikely To Derail

The European Union continues to build closer economic relations with Iran, despite Washington branding the country part of an "axis of evil." But a new initiative -- to negotiate a trade and cooperation agreement with Tehran -- is being slowed by a European debate over how hard to press Iran over human rights and the war on terrorism. RFE/RL looks at Europe's trade policy toward Iran and the debate surrounding it.

Prague, 17 May 2002 (RFE/RL) -- The European Union and the United States have deep differences over their policies toward Iran, and those differences are showing no signs of diminishing amid the U.S.-led war on terrorism.

Since the 11 September terrorist attacks, Washington has dubbed Iran part of an "axis of evil" in an effort to highlight the security threats U.S. officials say it poses. The U.S. accuses Iran of seeking to obtain nuclear weapons and long-range missile technology. It also charges Iran with aiding Lebanon's Hezbollah and Palestinian groups, such as Hamas, which Washington lists as terrorists.

The U.S. maintains a long-standing policy of isolating Iran, with which Washington has had no diplomatic relations since the 1979 Islamic Revolution. U.S. companies largely remain forbidden from investing in, or trading with, Iran. Washington also continues to threaten -- but has not yet enforced -- punitive actions against foreign firms that make substantial investments in its energy sector.

By contrast, European states have re-established diplomatic relations with Iran in the decades since the revolution, and Europe has become Iran's main trading partner. Britain's "Financial Times" reports that the EU's exports to Iran in 2000 were worth more than 5.2 billion euros ($4.7 billion). That same year, Iran exported some 8 billion euros' worth of goods to Europe, 80 percent of them oil products.

Now, the EU is seeking to accelerate its trade relations with Iran by negotiating a trade-and-cooperation agreement with Tehran. That would follow upon bilateral arrangements its member states already have concluded and could eventually open the way to Iranian products receiving preferential access to EU markets.

The trade initiative, which has been under discussion for several years, has been billed by the EU as a keystone of Europe's strategy of engaging Iran in order to boost its reform movement. The European Commission has said it wants the agreement to "put our relations [with Iran] on a contractual basis" and to result in a more intense political dialogue between the two sides. The EU also has said that the dialogue should include such issues as nonproliferation of weapons technology, cooperation in the fight against terrorism, and Iran's role in the Middle East.

But as the initiative approached a major milestone in Brussels this week, it was slowed by a debate among the EU states over just how firmly the union should insist on Iran's discussing such potentially volatile issues. Due to that debate, the European Commission had to postpone efforts on Monday to win approval at a meeting of EU foreign ministers for opening the talks with Iran. News agencies report that no decision on starting the talks is now likely before next month.

Analysts say the EU members are divided between those states that want the trade talks tied closely to Iranian progress on issues like human rights and those that believe insisting upon such linkages too strongly could delay reaching a trade accord for years.

Simon Williams, a regional expert at the Economist Intelligence Unit in London, said the debate over the EU trade accord is driven by differences among the members in their individual policies toward Iran.

"It does make quite clear that there are disagreements [among EU members over Iran]. It's well known that there are concerns in member states about certain aspects of Iran's domestic environment and concerns over its military development program, as well. And I am sure that [these concerns] will have been compounded to some extent by the U.S. stance. So I think this is bringing out some of those concerns," Williams said.

The "Financial Times" reported on 12 May that Britain, the Netherlands, Ireland, and France "have insisted that talks on a trade pact be linked to Iran meeting conditions contained in the EU's negotiating mandate," which includes provisions on human rights and fighting terrorism.

But the paper says, "Italy and Greece [have] wanted to play down the ...clauses [regarding conditions]." Those states are reported to favor a quick trade accord and argue that overinsistence on the clauses could inhibit Iran's reformers, rather than strengthen them.

Still, if the differences this week forced the EU foreign ministers to temporarily postpone their approval for opening negotiations, analysts predict they will quickly try to find a compromise that allows the long-planned initiative to go ahead.

"[As for] the disagreement [among] the member states, it is difficult to judge how serious it is. I think there is too much support for advancement in these political and commercial ties within some member states to allow this to stall at all or derail it or in any sense set it back," Williams said.

With EU diplomats now moving into behind-the-scenes talks to find a compromise over the trade initiative, it is too early to know what form the EU's final negotiating position toward Iran will be.

But EU officials themselves have been quick to minimize the differences the member states must bridge. Chris Patten, the EU's commissioner for external affairs, said that, "there is absolutely no dispute on the importance of opening negotiations with Iran." He added: "The only question is what is the most effective mechanism."

Spanish Foreign Minister Josep Pique, whose country holds the EU's rotating presidency, sounded the same note. He said, "I think we shall be able to bring the two views together."

That makes it all but certain that the EU will soon proceed with what will be a dramatic boost in its trading ties with Iran and a new step away from Washington's efforts to isolate the Islamic Republic.

Iran, which in recent years has stepped up efforts to build economic and political relations with Europe and Japan, is also looking forward to the trade agreement as a landmark in its ties with the EU.

Iranian Foreign Minister Kamal Kharrazi said late last year, on a trip to Brussels to discuss the initiative, "We welcome the pragmatic approach of the EU [toward Iran], especially economic cooperation." He added: "Certainly, there are many cultural differences, but we have many things in common."