Constrained autonomy in EU external action: allied institutional hedging and the private compliance veto under US extraterritorial sanctions

This article examines why EU legal and institutional measures intended to preserve lawful economic engagement with Iran failed to convert formal policy autonomy into effective external action after the United States ceased participation in the Joint Comprehensive Plan of Action (JCPOA) and reimposed previously lifted or waived Iran sanctions. It develops allied institutional hedging to describe legal, financial and infrastructural safeguards constructed by an aligned actor that remains embedded in a dominant partner’s networks while seeking to preserve selected policy options. Using within-case process tracing, the article shows that the Blocking Statute, INSTEX and financial-resilience agenda generated institutional mobilization but not effective autonomy. A private compliance veto emerged as firms, banks and intermediaries valued access to US markets, dollar finance and correspondent-banking networks over protected Iran-related activity. The article contributes to European integration research by explaining how EU external action is constrained through market-mediated private compliance.