Iran's Zarif meets EU foreign policy chief as Europe tries to save nuclear deal

[May 15, 2018]  By Robin Emmott and Parisa Hafezi

BRUSSELS (Reuters) - Iran's talks with European countries to save the nuclear deal are on the right path despite the U.S. withdrawal, its foreign minister said after meeting the European Union's foreign policy chief on Tuesday.

Britain, France and Germany were to press Iran later on Tuesday to stay in the nuclear accord which U.S. President Donald Trump abandoned last week and which has left Europe with few ways of keeping the accord's benefits flowing to Tehran.

At a dinner among the four countries' foreign ministers and the EU's top diplomat, the European powers will say that they stick by the terms of the 2015 pact giving Iran sanctions relief in return for an end to its nuclear ambitions.

EU foreign policy chief Federica Mogherini, who met Iranian foreign minister Mohammad Javad Zarif on Tuesday morning, said it was up to the European powers "to preserve a deal we have achieved together. We will all save it together."

Speaking to reporters after talks with Mogherini, Zarif struck an optimistic note.

"Our meeting with Mrs Mogherini was good and constructive ... We are on the right path to move forward ... Whatever decided should preserve and guarantee Iran' rights ... Our talks (with the E3) will continue in the next two weeks," he said, referring to Britain, France and Germany.

"We agreed over the importance of full implementation of the nuclear deal ... and preserving the interests of Iran and all those remaining parties," he said.

But European diplomats briefed on the Brussels meeting acknowledged that the EU support, however sincere, risked looking hollow after Trump last week reimposed an array of wide sanctions on the Islamic Republic that will hit European companies' investing in Iran.

The EU, which along with Germany, France, Britain, Russia, China and the United States, signed the nuclear accord with Iran, does have some steps it can take to shield European business in Iran.

They include retaliatory sanctions, allowing the European Investment Bank to invest directly in Iran and coordinating euro-denominated credit lines from European governments. In the past, the European Union has also lodged complaints at the World Trade Organization.

But the reach of the U.S. financial system, the dominance of the U.S. dollar, Trump's efforts to weaken the WTO and the presence of European companies' operations in the United States all weaken any potential EU measures.

"It is going to be very difficult for us to preserve the economic benefits of the Iran deal," one senior European diplomat said. "We will try to uphold our side of the bargain."

Following Tuesday's evening talks in Brussels, all 28 EU leaders are expected to discuss their next steps at a summit in Sofia on Wednesday, but no decisions are expected.

Iran's Foreign Minister Mohammad Javad Zarif talks to the media after a meeting with European Union foreign policy chief Federica Mogherini at the EU Council in Brussels, Belgium, May 15, 2018. REUTERS/Francois Lenoir

They could consider retaliatory sanctions using the EU's so-called blocking statute that bans any EU company from complying with U.S. sanctions and does not recognize any court rulings that enforce American penalties.

But the measures have never been used and may be difficult to enforce, while EU companies could still face asset seizures, fines and possibly criminal charges in the United States.

"Let's not fool ourselves that are that dozens of things we can do," said a second senior European diplomat.

"We'll outline what we might be able to do to keep trade flowing, but we'll tell them (Iran) that they should be under no illusion about our ability to influence American policy and to influence the economic situation," the diplomat said.

NO OPTIMISM

Senior Iranian officials say Europeans need to make good on their promises if they wanted to salvage the nuclear deal.

The accord lifted international sanctions on Iran in 2016 in return for Tehran shutting down its capacity, under strict surveillance by the U.N. nuclear watchdog, to stockpile enriched uranium for a possible atomic bomb.

Trump denounced the accord, completed under his predecessor Barack Obama, as a "horrible, one-sided deal that should have never, ever been made" as it did not cover Iran's ballistic missile program or its role in Middle East conflicts.

The deal's proponents say it is crucial to forestalling a nuclear Iran and preventing wider war in the Middle East.

"So far we have had very positive signals from signatories of the deal ... but what is important is for Europeans to find a way to protect their investors from U.S. penalties (when they invest in Iran)," a senior Iranian diplomat said.

But European diplomats were despondent. "We don't have much to threaten the Americans. Optimism doesn't abound."

(Additional reporting by John Irish and Gabriela Baczynska; Editing by Richard Balmforth)

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