EU relations with the Islamic Republic of Iran

With a view to gaining a more stable partner in the Gulf region, the European Union is aiming to develop political and economic ties with Iran and promote cooperation in areas such as the environment, combating drugs and immigration. However, there is one necessary precondition: political, economic and legislative reform in Iran.

ACT

Communication of 7 February 2001 from the Commission to the European Parliament and the Council on relations with the Islamic Republic of Iran [COM(2001) 71 final - Not published in the Official Journal]

SUMMARY

The European Union (EU) has both political and economic reasons for developing closer ties with Iran. Given Iran's strategic geographical position and its large reserves of natural gas and oil, it could play a key role in the future of the Gulf region. The Commission considers that a greater degree of democratisation and respect for human rights in the country would help bring about greater stability and peace in the area.

Reforms as a precondition

2. However, cooperation of any kind is conditional upon reforms being addressed first, for instance on the political front where:

• in the matter of human rights, a regular dialogue needs to be established between the EU and Iran, which is alleged to use torture and does not uphold the rights of women or minorities or the freedom of the press;
• concerning support for radical groups, Iran stands accused of supporting certain extremist groups such as the Palestinian Hamas and Islamic Jihad and the Lebanese Hizbollah and the EU is calling on Iran to establish a more conciliatory foreign policy - on which President Khatami has already embarked;
• on security issues, Iran's nuclear programme is a source of concern for the EU but a first step to allay these concerns was taken in December 2003 when Iran signed the additional Protocol to the 1986 non-proliferation treaty.

3. Similarly, on the economic front, Iran needs to pursue a policy of economic liberalisation as an essential precondition to any enhancement of commercial and economic cooperation between the EU and Iran.

Areas of cooperation

4. The Commission considers that, provided the reform process continues, it would be in the mutual interest of the EU and Iran to develop closer ties. These would be sought not just in the political and economic sphere but also in matters of the environment, combating drugs and immigration. The Commission therefore recommends that the Council encourages political and economic reform through:

• more frequent official and unofficial bilateral contacts;
• greater cooperation in areas of mutual interest and concern (such as drugs, the rule of law, refugees);
• promotion of dialogue on human rights;
• strengthening the Common Foreign and Security Policy (CFSP) dialogue by stepping up negotiations on regional security, weapons of mass destruction and nuclear proliferation;
• seeking appropriate ways of developing contacts between individuals.

5. The Commission recommends promoting bilateral economic relations by negotiating a trade and cooperation agreement and keeping up the activities of the Commission-Iran working groups on energy, trade and investment.

Background to the EU's relations with Iran

6. At present the EU does not have any contractual relations with Iran, but the first steps towards cooperation were taken in an agreement with the Shah which lapsed in 1977 before the Islamic Revolution. Dialogue in a specific area began in 1995, was widened in 1998 - following the election of President Khatami the previous year - and is now pursued at six monthly meetings held in Troika format.

7. This allows views to be exchanged on:

• global issues: terrorism, human rights and proliferation;
• regional issues: Iraq, the Gulf, Central Asia, the Middle East Peace Process;
• areas of cooperation: drugs, refugees, energy, trade and investment.

8. In October 1998, in the hope of initiating closer relations, the Council asked the Commission to take up contact with Iran with a view to exploring possible areas of cooperation. Following a meeting in December that year, energy, environment, transport, agriculture, drugs control, refugees and human rights were identified as such areas. Although there is no financial or technical cooperation between the EU and Iran (other than in the form of a few humanitarian aid initiatives and a little aid for combating drugs), there have been working parties on trade and investment and meetings have been held between experts on drugs and refugees.

9. In 1999 Iran gained observer status on the INOGATE (pipelines for carrying oil and natural gas to Europe) and TRACECA (Transport Corridor Europe-Caucasia-Asia) programmes.

Situation in Iran

10. The election of President Khatami in 1997 and his re-election in 2001 helped improve relations between Iran and the EU. Iranian politics are characterised by a constant power struggle between the reformers and two major groups, namely:

• the conservative centres of power, under the final authority of Ayatollah Khamenei, which control much of the judiciary, the security forces and the revolutionary armed forces and have proved their ability to obstruct reforms;
• the minority "Islamic Right", which draws its support largely from the "Bazar" merchants and shopkeepers, the Revolutionary Guards and militias, certain foundations and the judiciary.

11. President Khatami seeks peaceful civil and economic reform within the existing political framework of the Islamic Republic. The reformers have the tacit support of the more pragmatic hardliners.

12. On the economic front, Iran has a population of some 69 million and a gross national product (GNP) of some EUR 180 billion. The Commission considers the economy inefficient and centralised and in need of moving in the direction of a market economy and opening up to the rest of the world. A five-year reform plan was introduced at the end of 1999.

13. Iran has the world's second largest natural gas reserves (16% of total world reserves) and third largest oil reserves (10%).

14. The EU is Iran's principal trading partner, with roughly 40% of EU imports coming from Iran and roughly 36% of Iran's exports going to the EU.

Last updated: 07.05.2007