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US holding EU hostage over Iran – ex-EU commissioner

The American withdrawal from the Iran nuclear deal is causing a headache for the European guarantors of the treaty – in case of Germany, threatening firms that made large investments in Iran. How will Berlin and the EU deal with this? We ask Guenter Verheugen, former vice-president of the European Commission.

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Sophie Shevardnadze: Guenter Verheugen, former Vice-President of the European Commission, welcome to the show. It’s really great to have you with us today.

Guenter Verheugen: Hello Sophie, good to see you.

SS: So after Trump took America out of the Iran deal, which means that European companies in Iran may be subject to American sanctions, the EU fired back - activating a law that would block European companies from complying with U.S. decisions on Iran. In your opinion, who is going to outsanction who here, the U.S. or Europe?

GV: I’m afraid that the Americans have the bigger stick here. If you were a European company or a German carmaker, for instance, and if you look at the figures, what kind of business you do in Iran, what kind of business you do in the United States, - you have not much choice, and you will decide not to invest in Iran, you will continue to invest and make business in U.S. And if the European Union really promises to compensate for all the losses, I can promise you: that goes far beyond the financial capacities of the European Union. So I’m really afraid that the American policy of unilateral action, the American policy of taking hostage other nations and companies can be successful in the end.  

SS: The European statute that has been activated prohibits EU companies from cancelling their business with Iran due to American sanctions. So if I’m a European company in Iran, I have to suffer the consequences brought onto me by the Americans, and if I quit Iran, then EU will go after me - doesn’t this put EU companies between the devil and the deep blue sea? How’s that making their life easier?

GV: I don’t think that the problem is the role of the companies which are already active in Iran. The problem is that the promise that went with the Iran deal was that we would do more and help Iran develop their economy and increase the living standard of their people. That would mean much more investment than we have done in the past. And what I have said and I would like to repeat that: you cannot expect new major investments in Iran coming from major European companies, in particular those that are world leaders, who are leading in technology and innovation. I’m really afraid that the American action was well-calculated and that we have no real defence against it.     

SS: Regardless of Europe’s countermeasures, do you think the deal will survive without the Americans?

GV: I think, it can. It depends very much on co-operation between the guarantor countries, in particular Russia, China and the European countries. As far as I can see they are committed to do everything they can to keep the deal alive. But for the people in Iran, of course, the question will be - does it pay in the end? But I cannot foresee. What we can see is that this deal is clearly in jeopardy, and with the deal the whole system of non-proliferation is in jeopardy, not only in the Middle East but everywhere. It might change the whole security pattern of the world, it’s a very serious situation. In this situation it would be extremely important to organise co-operation between other partners of the deal that I already mentioned in order to create a counterweight.   

SS: In the wake of the U.S. decision on Iran Donald Tusk says that with friends like U.S. you don’t need enemies. Trump said the same can be said about EU. Are U.S. and EU enemies from now on?

GV: Absolutely not. I must say, I know Donald Tusk very well and I like him very much. Normally he’s not using strong words, so I was really surprised. My understanding was that he was really angry about the communication with the Americans. I wouldn’t use the term enemy but it’s obvious that the partnership between the United States and the European Union is entering a new age. It’s not like it was in the past when the Americans and the Europeans more or less shared the same values and directives. The Europeans accepted that the Americans have the leadership and the Americans were generous enough to provide security. I think that’s finished. We need to redefine the relationship. The only thing I would like to say right now is that we in Europe shouldn’t make the mistake to believe that the presidency of Donald Trump is just a short-living mistake. I’m afraid that Trump is representing America much more than Obama represented America. And we should be aware that this policy will probably continue. I mean, the America First policy.

SS: So the French Finance Minister is calling on European leaders to defend Europe’s economic sovereignty from the United States. At the same time he and his German colleague are courting their U.S. counterpart Steve Mnuchin trying to get exemptions for their companies from the looming sanctions. What kind of sovereignty is this if Europe is repeatedly finding itself in begging positions towards the United States?

GV: It’s the old problem. The discussion is very old on how to deal with the Americans. And different views are more common than unity, I have to confess. I’m not surprised. The French interests and the German interests are different, they are not the same. And so far the European institutions didn’t manage to create a common position. In my view it was very difficult. Do we really want to create a trade war with the United States? The United States is the strongest economic partner for the European Union and vice versa. We’re very much depending on each other. There will be no winner in a trade war. And my view is it should be avoided. We cannot accept that the Americans dictate the terms of the business. It has to be partnership. But as long as we don’t know that the partnership is really finished we should try to keep it alive.

SS: Germany was previously slammed by the United States for failing to pay its share of 2% of its GDP to the NATO budget. Trump now says member countries must pay 4% of their GDP to NATO. Is Germany planning to meet this target? If almost nobody in Europe is even meeting the 2% target, how is Washington going to make everyone pay 4%?

GV: I can tell you that the strong majority of Germans, and in my view the strong majority of Europeans everywhere is strictly against a new arms race and don’t see the need for higher defense spending in the European Union than we already have. We can create synergies in the European Union by co-operating better in defense matters, we have started to do that. But I would strictly oppose the idea that we have to spend 2% of our GDP for common defense, and in my view an even higher percentage is absolutely not debatable. 

SS: So Trump also says that those underpaying to the NATO budget will be dealt with whatever that means.

GV: Yeah, whatever.

SS: That’s almost at the same time as he’s threatening sanctions on Europe over Iran. I mean, why does Europe, and Germany in particular, allow United States to blackmail them here and there? That’s what it looks like from the outside.

GV: I agree. In the past the European attitude vis-a-vis the American policy was always a mixture of megalomania and strict obedience. We never found the right middle here. So we need to discuss now what we want to have and we need to tell our American friends that until now the EU-U.S. axis was a guarantor for peace and stability not only in Europe but in other regions as well. If that axis disappears we will have more tensions and conflicts, the world will come closer to the final conflict and nobody, even Mr. Trump, can really want it.  We must do everything we can to prevent a situation where the Europeans and the Americans are in different camps. But I know it’s going to be difficult.

SS: So, the new German foreign minister, Mr. Maas, has started his tenure by taking a tough stance on Russia. But just a little while later we see Germany and Russia standing together in support of the Iran deal against the American attempts to dismantle it. Can one of the effects of the Iran deal affair be to actually bring Germany and Russia closer together?

GV: Yes, I think it does. We have a strong common interest here and, perhaps, it shows that there are many other areas where we have common interests. As far as the new German foreign minister is concerned, he’s learning in the job and, perhaps, we should give him a little bit of time. I was slightly surprised when he made this announcement because that was not the policy formulated in the coalition agreement, and it’s clearly not the policy of the Social-Democratic Party to which he belongs. My feeling is that the strong majority, not only of the Social Democrats but the whole German population, wants good and friendly relations with Russia, it strongly dislikes the confrontational policy that we’ve seen lately.   

SS: In his first interview as German Foreign Minister Mr. Maas was using words like “belligerent” and “hostile” when speaking about Russia - something no acting German foreign minister was heard saying before. Should Maas be seen as Berlin’s mouthpiece here? I mean, at the same time, Chancellor Merkel is meeting with Putin, and saying that relations with Russia are a strategic priority, that countries need to talk... Does the German government have a united line on Russia at the moment or not?

GV: Good question. I’m not a member of this government, but I noticed the discrepancy that you’ve mentioned. I wouldn’t use the terms Mr. Maas used. And perhaps he will not repeat them. My understanding is that Chancellor Merkel is very much interested in maintaining constructive relations and building confidence, and she’s the one who defines the guidelines of the German foreign policy. So give the present coalition in Germany a little bit of time to adjust. My understanding is that finally the policy line will be to try to co-operate with Russia as much as possible.  

SS: Like you have mentioned, the attitude that Mr. Maas has taken towards Russia has brought sharp criticism from his own party members and other German politicians. It seems that while the German course on Russia is in line with the EU, there is an internal political divide when it comes to relations with Moscow. How deep is this divide? And how does it affect policy?

GV: That is the matter that concerns me very much. What I can see for the last couple of years is the divide getting stronger and stronger between the normal population and the so-called intellectual elites. People in the media, in think-tanks and also in political positions have a much tougher position than an average German citizen. We have a similar situation in other areas as well that the elites in our country are losing contact with the interests and the views of the people. That’s serious for the democracy if the normal people and the elites have completely different views. And if you ask me who should change, my answer is clear - those people writing articles, increasing the tensions and the confrontation, and they should rethink what they are doing.    

SS: I agree with what you are saying because I have statistics here from Der Spiegel, it says that 68% of Germans do not want to toughen the stance on Russia, and overwhelming 94% of Germans think that good relations with Russia are important.

GV: Exactly.

SS: Will the opinion of voters pressure the German leaders to find a softer approach to the German-Russian relations in the end?

GV: It depends on what happens in reality. Foreign policy is not a matter of votes, foreign policy is a matter of deeds. So we have to see whether we can find common ground in those areas where we have common interests, like Middle East, Iran. Perhaps, even Ukraine in my view is the area where we have common interests. And, of course, economy and technology. A good partnership or a good relationship needs substance. We need to do something. And here we shouldn’t forget that the bilateral relations between Germany and Russia despite all the disturbing words and voices are still very good. We have very strong cultural relations, we have very strong economic relations. We have extremely strong cooperation between people and organisations from the civil society. We shouldn’t underestimate that. And yes, I believe that finally German politicians will understand that we in Germany have a particular responsibility to make sure that Russia is treated as an equal partner in Europe. 

SS: So even if there’s a political decision in Berlin to ease the sanctions, they are approved by all EU member states - so are Germany’s hands tied on the issue, regardless of whether the government wants to lift sanctions or not?

GV: The sanctions are a European decision and a single country like Germany cannot change it. We need a common decision here. But I believe, if the conditions are there that would allow the German government or any other government to say that we do not need the sanctions any longer, they would like to do that rather sooner than later. Nobody really likes the sanctions: the Germans don’t, the French don’t, the Italians don’t. Nobody likes it. And I would hope that the visit and the context that will follow will create a better climate and the next step we can have will be the European decision to lift the sanctions step by step or in one step, it depends on the situation.  

SS: Meanwhile, as Germany goes along with EU sanctions, it still manages to do lots of business with Russia - for instance, building the Nord Stream 2 giant pipeline bringing natural gas into Germany directly from Russia. How does Berlin balance this tough and principled diplomacy approach with pragmatic pipeline projects?

GV: Nord Stream 2 in Berlin’s view, as far as I understand - I wasn’t involved in decision making there - is in the interest not only of Germany, but it’s also in the interests of our neighbouring countries in the East, in particular Poland and the Baltic countries. And I think, Mrs. Merkel made it clear that Nord Stream 2 doesn’t mean necessarily that Ukraine is losing its importance as a transit country. I think, the best solution will be to find the way that satisfies the needs of Ukraine and Poland by guaranteeing that a certain amount of energy will be transported via these countries. And then Nord Stream 2 which we need to meet the demand in gas in Europe. The demand is not shrinking, the demand is increasing, everybody knows that.  

SS: So Merkel made it clear recently that Nord Stream 2 project shouldn’t go forward until all the issues with Ukraine’s transit role are settled. She said that there are political considerations involved. How does this go along with the German government officials’ numerous statements that Nord Stream 2 is a purely commercial project?

GV: It doesn’t go along with that. I do not know if the German government has a legal instrument to stop it. I don’t think so. So this was a political statement. In my view it would be wise to do as I have said - to find a better solution which would take into account interests of Ukraine and Poland. But Nord Stream 2 is, as you have said, for economic reasons absolutely important for Germany and the rest of Europe.

SS: So why is Nord Stream 2 deemed so dangerous in Brussels? I mean, the Germans are pragmatic people, they wouldn’t sign up for something if it were really strategically dangerous. Isn’t more infrastructure always a good thing?

GV: I would agree. The opposition isn’t new. There was already tough opposition against Nord Stream 1, as you remember. The Poles were complaining a lot, and other countries as well. With Ukraine we have the same situation. The Poles feel that they are bypassed here literally, that the decision was made without consulting them. In my view it was a mistake, we should have tried to take Poles on board. But that is spilt milk now. Again, the best solution would be taking into account the rising demand for gas from Russia, division of labour, so to speak, but with Nord Stream 2 it’s the traditional transport lines which we already have.

SS: Alright, thank you very much for this interesting talk. We were talking to Guenter Verheugen, former Vice-President of the European Commission, discussing European efforts to rescue the Iran deal and Germany's relations with Russia.