Abstract
The Islamic Republic of Iran and Western Europe have had an uneasy political but economically productive relationship for two decades. During this period Iran and France, and Iran and Britain, have broken relations, and then restored them. Also, the West European countries (European Union, EU) have twice collectively briefly recalled their ambassadors from Iran over its alleged involvement in terrorism in Europe. Economically and commercially, however, the EU and Iran have enjoyed a much better relationship. For example, trade between Iran and the EU reached $29 billion in 1996, including the most controversial oil agreement between France and Iran. The agreement was signed despite a strong objection from the US. Also, the skeleton of the Rushdie affair, which had haunted the two sides for so long, was finally put to rest when President Khatami declared that the affair was ‘completely finished’.
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