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As Trump Turns Away from Iran, Europe Presses On—But It’s Complicated

For young Iranians in Tehran this week, there were several ways to keep calm as they watched U.S. president Donald Trump rage against Iran at the United Nations General Assembly, urging its total economic isolation from the world. They could binge-watch Westworld, dance to Drake’s megahit “In My Feelings” (Kiki, do you love it?), or laugh it off by watching an episode of The Daily Show.

“We love American music. We watch American TV series and movies,” says Mohammadreza Azali, 31, co-founder of Iran’s tech news website Techrasa and a tech roadshow called Silk Road Startup. While Iran’s conservative clerics rail against the U.S. as the Great Satan, among the country’s 82 million people—60% of them under 30—there’s a sharp distinction between their near-obsession with American pop culture, and their feelings about U.S. politics. “Since Trump came in, many people have build a guard against the U.S. government.”

Given the intense chill between the U.S. and Iran that played out at the U.N. in New York this week, it seems hard to believe that only two years ago, dozens of U.S. and European executives were landing in Tehran to scope out new business opportunities in a country in dire need of an upgrade in almost every sector, from transportation to tourism to the Internet. In countless hotel lobbies in Tehran, in a mix of English, German, and French, many said they were astonished at finding familiar things in Iran, and at how warmly they were welcomed. “Clients come in, and are amazed just sitting in a place like this,” one investment advisor in Tehran told Fortune at that time, as we sat sipping cappuccinos in North Tehran’s hip Sam’s Café, with Frank Sinatra on the stereo.

That, however, was then.

At the U.N. on Tuesday, Trump repeated his condemnation of the Iranian regime, telling the General Assembly that the country is bent on “chaos, death, and destruction” and vowing to impose tough new energy and banking sanctions beginning Nov. 5. Those sanctions are likely to push up global oil prices and could well ravage Iran’s $400 billion economy. Last May, Trump announced that would pull the U.S. out of the Iran deal. Known as the Joint Comprehensive Plan of Action, or JCPOA, the agreement was signed in 2015 after years of painstaking negotiations by the U.S., France, U.K., Germany, China, and Russia. The plan compels Iran to halt its uranium enrichment program in exchange for the West lifting sanctions and allowing Iran access to about $100 billion in frozen overseas assets. That uncorked decades of pent-up demands, and set off a flurry of investment interest in the country—hence the jammed hotel lobbies and cappuccino bars just two years ago.

But the thaw is now over.

Iranian president Hassan Rouhani told the U.N. it was clear the U.S. was attempting to overthrow his government. And U.S. national security advisor John Bolton urged the world to isolate the country, warning Iran there would be “hell to pay” if it threatened a U.S. ally.

Despite that, world leaders have scarcely buckled at the tough talk. Instead, the European Union, Russia, China, and Iran this week met in New York to craft a mechanism to keep the Iran deal in place—even without the U.S.

The plan involves a complicated form of bartering that aims to stop Western companies from withdrawing from Iran, while at the same time protecting them from having the U.S. Treasury impose huge fines on them for remaining in Iran—or even, under U.S. law, bar them from operating in the U.S. In 2015, BNP Paribas paid a $8.9 billion fine to the U.S. Treasury for doing business in Iran, Cuba, and Sudan. And while those fines have worked to keep U.S. sanctions in place, Trump’s withdrawal from the Iran deal has sparked real anger among those who spent years negotiating the plan. “The Europeans have legitimate rights to decide with whom to do business,” the E.U.’s foreign policy chief Federica Mogherini told CNN’s Christiana Amanpour. “It is not only the Europeans, but also the rest of the world.”

That, at least, is the theory.

The reality, however, is quite different. And this week’s drama has highlighted how wide the gap is between leaders’ political intentions and hard-boiled business decisions.

Even before Trump took office in January 2016, doing business in Iran was intensely complicated, since most U.S. sanctions remained in place, despite the Iran deal. After decades of isolation, the simplest business transaction proved tough in Iran, which has no international banking system.

Yet fom the moment Trump announced he was ditching the Iran deal last May, Western companies that had rushed to Tehran to cut deals quietly began quietly dropping their plans—and for good reason. Most concluded that their involvement was far too risky, certainly relative to their links to the world’s biggest economy.

“Most of these big corporates have a lot of investments in the U.S., or they do banking in the U.S.,” says Richard Nephew, who helped negotiate the Iran deal while he was Deputy Coordinator of Sanctions Policy for the State Department under Barack Obama. “There is an awful lot of talk by E.U. governments, but ultimately they have not been able to turn any of that into action,” says Nephew, who is now senior research scholar at Columbia University’s Center on Global Energy Policy. “And meanwhile, corporations are making their own plans.”

Those plans increasingly exclude Iran. Last month, French energy giant Total sold its $1 billion investment in Iran’s South Pars gas field—the biggest gas field in the world—to China’s CNPC. The French automaker PSA, which makes Peugeot and Citroen cars, pulled out, too, after signing a major partnership with Iran, a market that was predicted to see new-car sales of 1.5 million this year. Both Air France and British Airways stopped their Tehran flights last week. And Boeing, which had trumpeted a $20 billion deal to upgrade Iran’s fleet, dropped all plans for doing business there.

All that is a stark contrast from the good old days—brief as they have been.

When I landed in Tehran on assignment there for Fortune in April 2016—my third trip to the country—there were still large billboards across the city of modern Iran’s founding father Ayatollah Khomeini, who led the Iranian Revolution in 1979. Revolutionary statements are still painted on the walls of the old U.S. Embassy, which has been shut for nearly 40 years since militant students stormed the compound and took American diplomats hostage for 444 days.

But under the surface, life has changed beyond recognition.

Millions of young, wired Iranians are hungry for all things Western. “This generation, this post-revolutionary generation, we don’t accept extremism,” says Saeed Mohammadi, who co-founded Iran’s e-commerce platform Digikala. Mohammadi was born shortly after the 1979 revolution. “There are lots of us,” he adds. “We have the potential to revolutionize this country within a decade.”

For many like Mohammadi, the Iran nuclear deal was not only a chance to do business with multinational corporations, but a chance to increase Western influence at home—something many crave after a lifetime of isolation. “Whatever is trendy in the U.S. is trendy in Iran,” Techrasa’s Azali, then 28, told me.

That is unlikely to fade any time soon. Many intended to tune into the Senate confirmation hearing of Judge Brett Kavanaugh on Thursday. And among the major American hits is House of Cards, Netflix’s dark take on the U.S. presidency, of which millions watch unofficial copies, dubbed into Farsi and broadcast on one of Iran’s national channels. “The channel wanted to show how American politics works,” Azali says. Apparently, there is little need to watch Trump himself.