After the international nuclear accord in 2015, European and Iranian businesses have worked to expand previously prohibited trade and investment, but tens of billions of euros in deals are being slowed down because of political uncertainty and financial issues.
US President Donald Trump is threatening to decertify the pact ahead of a congressionally mandated October 15 deadline to report on Iran's compliance. That would give Congress 60 days to snap back sanctions that were lifted as part of the Joint Comprehensive Plan of Action (JCPOA), the accord signed in 2015 by Iran and six world powers.
Reimposing sanctions would effectively kill the nuclear deal, creating a huge rift between the United States and the European Union, which is united in fully implementing the nuclear deal and expanding business ties with Iran.
"The nuclear deal is working and delivering, and the world would be less stable without it," Helga Schmid (pictured), the secretary-general of the EU's foreign policy service, told the Europe-Iran Forum gathering in the Swiss financial capital of Zurich. "The EU fully supports the JCPOA and expects continued implementation by all parties."
"At the European Union, we support economic cooperation between Iran and Europe — at the political level and at the policy level," she added.
'Slower than expected'
If Trump decertifies the deal, there is no guarantee that lawmakers would impose new sanctions or even take action. Defense Secretary James Mattis, National Security Adviser H.R. McMaster, White House Chief of Staff John Kelly and Secretary of State Rex Tillerson are all reportedly in favor of the US maintaining its commitment.
The deal had created expectations that trade between Iran and the European Union would flourish again after international nuclear sanctions cut the country off from financial markets.
Even after the pact came into effect, however, EU bankers and firms continue to face steep hurdles when investing in Iran. For one, US-imposed restrictions make it complicated for EU companies to finance and clear transactions with the country. There are also significant challenges due to Iran's difficult business environment.
And the latest rhetoric from the United States is only adding to that uncertainty.
Though it lifted some sanctions after Iran signed on to the nuclear pact, the United States retains a number of measures that prohibit most US entities and individuals from doing business with the country.
Adnan Tabatabai, an Iranian analyst, said Trump was using sharp rhetoric "to pollute the political climate, confuse businesses and make them think twice about the Iranian market."
Only a small number of small and midsize European banks are willing to finance trade or investments with Iran. Major banks with operations in the United States have been more cautious in order to avoid stiff fines from US authorities. Firms that don't operate in the United States are not subject to such restrictions.
Last month, Austria's Oberbank and Denmark's Danske Bank became the first major EU banks to extend some €1.5 billion ($1.76 billion) in credit backed by their governments to more than two dozen Iranian banks. The French state-owned bank BPI followed suit, planning to provide some €500 million in credit to French business.
Overall, trade increased 94 percent in the first half of 2017 from the same period in 2016, according to EU statistics, signaling progress in rekindling the bloc's trade with Iran in the wake of the lifting of sanctions.
"There is progress, even if it is slower than expected," said Ulrich von Zanthier, the director of financial services at the KPMG consultancy.
Among other major transactions this year, the French energy giant Total inked a $5 billion deal with Iran, and the automaker Renault entered a joint venture to produce cars. These deals and others signal that European companies are willing to take a chance.
"Of course there is risk, but there would be risk not to participate" in the Iranian market, said Philippe Delleur, a senior vice president of the French train manufacturer Alstom, which has signed a joint venture deal to build metro carriages in Iran.
Former State Department official Jarrett Blanc, who worked on the nuclear negotiations and is currently at the Carnegie Endowment for International Peace, said EU banks and firms should be able to find creative ways to fulfill deals without going through the United States.
Blanc added that even in the best-case scenario, in which the United States remains a party to the deal, the EU should not expect any softening of the US's economic position on Iran under the Trump administration.