- Policy Briefs
On October 18th, the date designated as Transition Day under the 2015 nuclear agreement with Iran, most of the remaining U.N. Security Council restrictions on Iran’s nuclear program expired with little fanfare. The agreement itself, the Joint Comprehensive Plan of Action (JCPOA), is a dead letter: Iran’s nuclear program is surging and the international coalition that forged the deal has collapsed.
Yet Transition Day also ended a period of divergence between U.S. and European sanctions policy on Iran. The three European parties to the JCPOA—France, Germany, and the United Kingdom, collectively known as the “E3”—followed through on an earlier pledge not to lift proliferation-related sanctions on Iran, as stipulated in the agreement. The decision, implemented simultaneously by the European Union and the United Kingdom, falls well short of triggering the “snapback” of stricter U.N. sanctions. But it shows a consensus in Europe that Iran’s behavior on the nuclear issue no longer warrants the sanctions relief promised to it in 2015.
The European decision is a positive development for the prospects of a coordinated campaign to counter Iran’s nuclear program and other destabilizing activities. It follows a welcome alignment in sanctions related to human rights and drone proliferation. But further action is needed to fully transition to a renewed period of convergence resembling that which prevailed between the United States and the European Union prior to the JCPOA.
With that agreement now defunct, a return to pre-JCPOA sanctions coordination is in order. U.S., European, and other allied sanctions ought to increasingly align to target Iran’s weapon programs and their foreign suppliers, as well as Iran’s shipping and banking industries and revenue-generating economic sectors. Doing so is not only sound policy in regard to the Iranian nuclear issue, but will help to address increasingly interlinked proliferation challenges posed by Russia, China, North Korea, and Iran’s proxies in the Middle East.
European Sanctions and Their Gaps
The British, French, and German joint statement announcing their decision stressed that the three countries were neither formally withdrawing from the JCPOA nor imposing new sanctions as part of the move. In a press release accompanying the statement, however, the United Kingdom invoked Paragraph 36 of the JCPOA, which allows participants in the agreement to cease performing their commitments “in whole or in part” if non-compliance by another party (in this case, Iran) has been left unresolved. The European Union also cited Paragraph 36 as the basis for retaining its sanctions. According to a plain reading of the text, the UK and the EU are thus free to impose additional sanctions so long as Iran remains out of compliance with the agreement.
They should do so, beginning with re-imposing sanctions on Iranian entities involved in missile and nuclear activities and their suppliers that were suspended as part of the JCPOA’s implementation. Prime targets include Bank Sepah, which has financed Iran’s acquisition of ballistic missile components, and Atomic Energy Organization of Iran (AEOI) affiliates involved in Iran’s uranium enrichment program.
The next step would be to sanction additional entities involved in Iran’s missile program. While the United States has frequently added to its designations of missile-related entities between 2016 and 2023, the European Union has not. One clear set of targets are the entities subordinate to leading Iranian missile producers Shahid Bagheri Industrial Group (SBIG) and Shahid Hemmat Industries Group (SHIG) such as Shahid Moghaddam Industries, which manufactures ballistic missile launch equipment. Other targets include Iranian companies involved in procurement such as P. B. Sadr Co., which has supplied military entities with equipment for making missile propellant. The UK and EU could undertake these additions without expanding the scope of their sanctions beyond entities directly involved in Iran’s missile and nuclear activities.
Expanding sanctions relating to Iran’s unmanned aerial vehicle (UAV) program is also critical. Europe—along with Australia, Canada, and Japan—has been proactive in sanctioning entities connected to Iran’s transfers of UAVs to Russia for use against Ukraine. The EU has mostly done this pursuant to its legal authority to sanction entities supporting the Russian war effort. In July, it adopted a new legal framework to independently sanction entities involved in Iran’s drone program regardless of whether or not they have supplied Russia. However, the EU has yet to sanction anyone under this new framework and has sanctioned far fewer entities supporting Iran’s drone program than has the United States.
In particular, Europe has been more hesitant than the United States to sanction entities in third countries supplying UAV or missile components to Iran. This is a particularly important gap given that Iran sources many of its drone parts from overseas, notably from China or from the West via middlemen based in China, Turkey, and other Middle Eastern or Asian trading hubs. Since the beginning of the year, the United States has sanctioned dozens of such suppliers and middlemen, including individuals such as Murat Bukey, a Turkish national alleged to have provided more than a hundred European-origin engines usable in UAVs and surface-to-air missiles to Iran. The EU and UK ought to follow suit in designating those entities, as well as utilize their own resources to identify and sanction other foreign suppliers of European-origin military and dual-use goods to Iran.
The E3 also specified in the joint statement that they would retain their conventional arms embargo on Iran, which had been set to expire this year. The UK and EU might also consider imposing targeted sanctions on entities outside their jurisdictions who are involved in arms transfers (beyond missiles and UAVs) to and from Iran, as the United States has recently done by sanctioning Russian state arms exporter Rosoboronexport and the Iranian Air Force over Russia’s supply of combat aircraft to Iran.
An important part of stemming arms transfers, and thwarting sanctions evasion more generally, is to tighten restrictions on Iran’s shipping industry. The European Union maintained an asset freeze on Islamic Republic of Iran Shipping Lines (IRISL) and an extensive list of its subsidiaries and affiliates prior to implementation of the JCPOA. Language authorizing the sanctioning of entities controlled by IRISL or providing services to it, including insurance, remains in the EU’s primary regulation governing sanctions on Iran. The EU and UK could restore those IRISL-related designations or at least target Iranian shippers active in the Caspian Sea, a key supply route from Iran to Russia. The United States sanctioned two Iranian Caspian Sea shipping companies, Khazar Sea Shipping Lines and Nasim Bahr Kish, in May in an attempt to disrupt Iran-Russia arms transfers, but neither entity has yet been sanctioned by the EU or UK.
The gap between European and U.S. sanctions in other areas will be more challenging to close. It would mean reimposing broad economic and financial sanctions terminated by the European Union in 2016 pursuant to the JCPOA. The most significant of these were an embargo and export restrictions on Iran’s energy sector, as well as an asset freeze on key entities within it, such as the National Iranian Oil Company. European authorities may be unwilling to re-impose sanctions on Iran’s oil and gas exports while the continent is dealing with spiking energy prices brought on by Russia’s invasion of Ukraine.
Perhaps the EU and UK would contemplate additional sanctions on dual-use industries in Iran’s manufacturing and metals sectors, however, building upon an existing EU restriction on the export of graphite and metals to Iran. New, or in some cases renewed, European sanctions on companies such as Iran Aluminum Company (IRALCO) and Mobarakeh Steel could help limit both Iran’s revenue from the export of common metals and its ability to manufacture or acquire specialty metals or carbon fiber for use in its nuclear or missile programs.
Iran is already largely cut off from the global financial system due to the deterrent effect on foreign financial institutions of U.S. secondary sanctions. However, the reinstatement of EU and UK financial sanctions would foreclose the prospect of Iran regaining access to the European financial system through overseas branches of Iranian banks and limit Tehran’s use of the euro in its overseas business dealings.
Effect of Expanded European Sanctions
An expansion of European sanctions would not be as dramatic in economic terms as the re-imposition of U.S. sanctions in 2018, insofar as U.S. sanctions are much more extensive in their extraterritorial scope. But European sanctions are important both economically and diplomatically. Foreign intermediaries, particularly in Asia, which do not have operations in the United States would be faced with a choice between doing business with sanctioned Iranian entities or with the EU and UK, which together account for roughly 17% of the world’s trade in goods. More vigilant European enforcement should also accompany a renewed sanctions push. This may help clamp down on evasion and smuggling—an important element given that Europe is often a source or a transshipment point for dual-use goods sought illicitly by Iran.
The convergence of European and U.S. sanctions would also send an important diplomatic message. With U.N. restrictions expiring, it would signal that countering Iranian proliferation remains an international and not just an American concern. It would also establish a template for a sanctions regime that other countries worried about Iran’s destabilizing activities could follow. And by having a pronounced focus on Iranian arms transfers to other countries, it would communicate that Iranian malfeasance is not a problem to be considered in isolation.
The Wider Context
It is exactly because Iranian proliferation does not exist in a vacuum that the convergence of European and U.S. sanctions is important. The Russian invasion of Ukraine brought about—or revealed—closer alignment and cooperation between Russia, Iran, North Korea, and China than had been apparent before. Iran and North Korea now arm Russia and are likely receiving funds or technology in return. Money, weapons, and technologies that are acquired by Iran are at risk of transfer to those countries or to proxies such as the Houthis, Hamas, and Hezbollah. China helps Iran, North Korea, and Russia to evade and weather sanctions and serves as a source of supply for dual-use components.
Russia and China can now be expected to veto any new action in the U.N. Security Council that would counter such proliferation. Therefore, absent the triggering of snapback, the United Nations can no longer form the basis of a meaningful sanctions regime either in regard to Iran’s nuclear or missile development or its trafficking in conventional arms.
Consequently, the advanced democracies of the West and Asia must deepen their own cooperation and coordination, together with any other countries that wish to join them, as they have done in response to the Russian war. The United States, the European Union, and the United Kingdom are central parts of this coalition. The rift between them on Iran sanctions policy begun by the United States’ 2018 withdrawal from the JCPOA has stopped widening. It is time to close it.
 The expired measures included a prohibition on missile-related transfers to and from Iran without case-by-case Security Council approval, language calling upon Iran not to test ballistic missiles designed to be capable of delivering nuclear weapons, and an asset freeze imposed on 84 individuals and entities that have been involved in Iran’s proliferation-sensitive nuclear activities. All that remains in effect is a requirement for Security Council approval of certain nuclear-related goods and technology transfers to Iran, as well as some related restrictions on assistance and investment, all of which are set to expire in 2025.
 The EU currently has legal authority to sanction entities that circumvent the EU’s own arms embargo against Iran under Council Decision (EU) 2010/413/CFSP and entities that supply arms to Russia for use against Ukraine under the Russia-related Council Regulation (EU) No. 269/2014, which it has already used to sanction Iranian entities involved in UAV transfers to Russia. It also has a legal basis in its Yemen-related Council Regulation (EU) No. 1352/2014 to sanction entities involved in supplying arms to sanctioned parties in Yemen, including the Houthis, but it appears to lack a broad legal basis for sanctioning entities involved in all arms transfers to and from Iran.
 In Article 23, Paragraph (2)(e) of Council Regulation (EU) 267/2012, which lists as one criterion for inclusion on the regulation’s asset freeze list, “being a legal person, entity or body owned or controlled by the Islamic Republic of Iran Shipping Lines (IRISL), or… acting on its behalf, or… providing insurance or other essential services to IRISL, or to entities owned or controlled by it or acting on its behalf.” This authority has not been utilized since the EU delisted IRISL as part of the JCPOA’s implementation.
 In Article 15, Paragraph 1 of Council Regulation (EU) 267/2012, which requires prior authorization for “the sale, supply, transfer or export of [listed] graphite and raw or semi-finished metals… to any Iranian person, entity or body or for use in Iran.”