The 28-member bloc failed to sway US President Donald Trump over his eventually successful attempt to withdraw Washington from the deal, leaving an opening for China to become more influential in Iran.
The Iran nuclear deal is on the brink after Tehran announced it was partially withdrawing from the landmark agreement.
Iranian President Hassan Rouhani said that his country would not abide by clauses on heavy water and low enriched uranium stocks, warning that Tehran would now abide by a “new logic”.
Rouhani, a driving force behind the agreement, said that Iran was not planning to destroy the deal, but instead “rescue it”.
Formally known as the Joint Comprehensive Plan of Action (JCPOA), the deal was agreed to in 2015 by the US under the Obama administration, the EU, Iran, China, and several European powers.
It required that Iran reduce its stocks of components and materials needed to build a nuclear weapon in exchange for limited sanctions relief.
In 2018, US President Donald Trump, a critic of Obama, pulled out of the deal, arguing it did not restrain Iran enough. That was despite there being no evidence that Iran was not holding to its side of the bargain.
EU opposition to US sanctions
The move was opposed by the EU, as well as China, and other world powers, but the EU’s objections were dismissed by the US.
Rouhani has given the EU a 60-day ultimatum to ensure his country’s interests under the deal are protected, or else Tehran will resume high level enrichment.
The EU has responded by saying it “regrets” the reimposition of US sanctions but rejected any ultimatum imposed on it by the Iranians.
“We strongly urge Iran to continue to implement its commitments under the JCPOA in full as it has done until now and to refrain from any escalatory steps,” it said in a statement.
The EU has been trying to implement payment structures that mitigate the impact of the US sanctions but these will not fully come into effect until the summer, and there has already been a decline in trade volumes in the billions, according to the Wall Street Journal.
But Iranian patience as the Europeans struggle for workarounds is wearing thin. Its oil exports halved between April and September 2018, from 2 million barrels per day (bpd) to 800,000.
The knock on effect has strained the Iranian economy and left ordinary Iranians struggling for the essentials.
The Chinese option
So where might the Iranians turn? One clue might be in the fact Rouhani included China in his pleas to save the deal.
China has repeatedly affirmed its commitment to the deal but just how much is up for debate.
Beijing is Iran’s biggest trading partner, with trade volume at around $31.6bn in 2018, with Chinese companies less at risk of flouting US sanctions than their European counterparts, because they have relatively fewer dealings with US markets.
However, according to a 2018 paper by the International Institute for Strategic Studies (IISS), it was unlikely Chinese companies would risk potential deals in order to save the nuclear deal.
As a workaround, the paper states that China could use smaller companies unconnected to US markets, to carry out high value oil purchases.
It could also price oil sales in its own currency, the Yuan, which could help counter the dominance of the dollar and traded without obstacles to China, the IISS paper said.
With the US and China seemingly on the brink of a full-blown trade war, this could be an idea Beijing is increasingly willing to entertain.
It seems as though the Europeans too are pinning their hopes on China, and even India, to save the deal.
According to a report by Reuters, the EU wants the Asian countries to counteract the effects of falling Iranian oil sales by buying Tehran’s oil using Europe’s payment mechanisms.
However, the plans are just talk at the moment, and no country has made a firm commitment.