How Brexit Will Impact Iran

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On June 24, 2016, Hamid Aboutalebi, a senior aide to Iran’s President Hassan Rouhani praised the United Kingdom’s decision to exit the European Union (EU) as a “historic opportunity for Iran.” Iran’s support for Brexit differed markedly from the perspective of most of the international community, which regarded Brexit as a major threat to Britain’s economic future and European unity.

While the Iranian government has yet to elaborate on how exactly Brexit will positively impact Iran’s economy, a closer examination of the post-Brexit geopolitical landscape justifies Aboutalebi’s statement. The departure of America’s closest ally, Great Britain, from the EU will likely pave the way for deepened Iran-EU economic cooperation.

Closer ties between Iran and continental Europe are unlikely to cause a deeper EU-Iran security partnership or a reciprocal thaw in Iran-UK relations, however. Historic animosities, Britain’s extensive ties with Iran’s Sunni rivals and the UK’s unwillingness to deviate from the United States’ sanctions policy, are major obstacles to a complete normalization of relations between London and Tehran.

How Brexit will Impact Iran-EU Relations

Since the announcement of the Iran nuclear deal on July 14, 2015, European businesses and governments have pushed aggressively for a deeper economic partnership with Tehran. Iran has leveraged its immense oil wealth and status as an emerging market to sign bilateral trade deals with individual EU member states.

In January, French President Francois Hollande and Rouhani agreed to multi-billion dollar export contracts spanning many economic sectors. These contracts included Iranian purchases of Airbus jets to modernize the fleet of Iran’s leading commercial airline Iran Air, and a landmark energy deal with French oil company Total, the first deal between Tehran and a Western oil company in the post-sanctions era.

In the months that followed, other European countries followed France’s example by signing major trade agreements with Iran. In April, Rouhani made Italy the first stop of his European tour, and successfully negotiated multi-billion dollar deals with Italian Prime Minister Matteo Renzi in the natural gas and railway construction industries. Germany, Iran’s primary European trade partner before the 2012 EU sanctions, also agreed to double its trade linkages with Iran within 3 years.

Britain’s close ties with the United States have prevented it from emulating continental Europe’s expansion of trade linkages with Iran. Therefore, Iranian official rhetoric emphasized how Brexit will reduce US influence over the EU. Deputy Chief of Staff of the Iranian armed forces Massoud Jazayeri described Britain’s departure from the EU as a “rejection of America’s imposition of will against European states” and urged the EU to assert its independence from Washington’s geopolitical agenda.

Iranian officials are also optimistic that Brexit could provide an opening for deeper Brussels-Tehran security cooperation. In recent months, Iran has tried to position itself as an ally with the West in combatting the Islamic State (ISIS). After their January summit, Hollande and Rouhani emphasized the need for Franco-Iranian counter-terrorism cooperation. Despite their divergent views on Syria, Rouhani urged Hollande to share French intelligence with Iran, as Tehran supported France’s efforts to combat “fanaticism, terrorism and extremism” in the Middle East.

Despite this conciliatory rhetoric, it is unlikely that Brexit or the enhancement of German hegemony over the EU will greatly strengthen security cooperation between Tehran and Brussels. While German Foreign Minister Franz Walter Steinmeier warmly welcomed his Iranian counterpart Javad Zarif to Berlin on June 16, Germany’s Chancellor Angela Merkel has publicly stated that no normalization with Iran is possible as long as Iran refuses to recognize Israel’s right to exist.

Public opinion in Germany is also overwhelmingly against a deeper security partnership with Iran. A 2012 Pew Global Attitudes survey revealed that only 6% of Germans viewed Iran favorably and a 2013 Gallup Poll showed that the German public regarded Iran as the second biggest threat to world peace. These sentiments explain Merkel’s reluctance to embrace Iran as a strategic partner, and ensure that expanded German hegemony in the EU will not be especially beneficial for Iran.

Many EU countries have also expressed concern about Iran’s ongoing ballistic missile program. On March 13, French Foreign Minister Jean-Marc Ayrault declared that the EU could re-impose sanctions on Iran if it continues its ballistic missile tests and military buildup. Therefore, a EU without Britain will facilitate the normalization of economic relations between Europe and Iran, but a durable security partnership is unlikely to follow in the short-term.

Why Brexit Will Not Significantly Improve UK-Iran Relations

While some analysts have speculated that the UK’s withdrawal from the EU will cause London to look to Iran as an emerging market trade partner, a thaw in UK-Iran relations is unlikely for three reasons.

First, historical animosity between Iran and Britain remains a visceral obstacle to normalized relations. The memories of British opposition to the nationalization of the Iranian oil industry in the 1950s and the UK’s collaboration with the United States in the 1953 coup against Mohammed Mossadeq remain vivid amongst Iranian policymakers.

Iran’s negative attitudes towards Britain resurfaced following Brexit. After the referendum, Jazayeri expressed his delight at the prospect of instability in the UK. He claimed “Britain must pay the cost for colonialism and crimes against humanity.” These hostile sentiments will ensure that conciliatory gestures from the UK, like British Prime Minister David Cameron’s praise of the Iran nuclear deal and last year’s reopening of the British embassy in Tehran are not harbingers of a broader thaw in Anglo-Iranian relations.

Second, Britain maintains close relations with Saudi Arabia and the United Arab Emirates, Iran’s primary Sunni rivals on the Persian Gulf. These countries have insisted that Brexit will not compromise existing trade linkages. While the Wall Street Journal reported unspecified asset movements within Saudi sovereign wealth funds from the pound to the euro, Saudi Arabia maintains 200 joint ventures with British companies worth $17.5 billion, making Riyadh a crucial Middle Eastern economic partner for Westminster.

The UAE believes Brexit will have little impact on Abu Dhabi’s ties with Britain, as connectivity between the UAE financial system and British financial institutions is limited. If Saudi Arabia and the UAE maintain close trade links with Britain, the prospect of deepened UK-Iran ties will dim considerably.

Third, the UK has largely concurred with the United States’ unwillingness to lift many financial sector sanctions against Iran. This policy has restricted the potential for trade between London and Tehran. Chancellor of the Exchequer George Osborne attempted to send a trade delegation to Iran last year, but these plans were cancelled due to opposition from Britain’s regional allies.

David Cameron’s failure to establish trade linkages with Tehran restricted the scope of British foreign investment in Iran. Investment is unlikely to appreciably increase as long as the US-UK “special relationship” remains intact.

Britain’s withdrawal from the EU will remove a major obstacle to closer economic relations between Brussels and Tehran. The trade linkages and foreign investment resulting from Iran’s strengthened economic ties with the EU could profoundly benefit Iran’s economy. Yet durable cooperation with the EU on security policy and a complete normalization of Iran-UK relations remains unlikely for the foreseeable future, due to lingering distrust and the closeness of the Britain-US alliance.

Samuel Ramani is an MPhil student in Russian and East European Studies at St. Antony's College, University of Oxford, specializing in post-1991 Russian foreign policy. He is also a journalist who contributes regularly to the Washington Post, Diplomat Magazine and Kyiv Post amongst other publications. He can be followed on Facebook at Samuel Ramani and on Twitter at samramani2.

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