INSTEX: Manifestation of Europe’s Attitude toward Iran

2019/03/18 | Economy, Opinion

Strategic Council Online: A review of what Europe has done to keep the Iran Nuclear Deal (also known as the Joint Comprehensive Plan of Action - JCPOA), with INSTEX (Instrument in Support of Trade Exchanges) being the latest example, shows that Europe wants to, but cannot afford or is not ready to pay the relevant costs. Dr Behzad Ahmadi Laforki - Expert on European Affairs

Following the US withdrawal from the Iran Nuclear Deal (also known as the Joint Comprehensive Plan of Action (JCPOA)), the European Union released a statement through its Foreign Policy Chief Federica Mogherini on May 9. The statement said the European Union (EU) deeply regrets the announcement by US President Donald Trump to withdraw from the JCPOA. It added that the JCPOA, unanimously endorsed by UN Security Council Resolution 2231, is a key element of the global nuclear non-proliferation architecture and is crucial for the security of the region.

Nearly nine months have passed since then and despite the fact that the European Union has adopted strong political stances in denouncing Washington for resuming the sanctions against Iran, the EU has diminished its efforts from a maximal level of blocking regulation to deal with the sanctions against a minimal level such as the Special Purpose Vehicle (SPV) and, at most, the INSTEX the platform of which is similar to the Humanitarian Special Purpose Vehicle (HSPV).

This behaviour of the European Union and the failure to comply with its commitments and promises, especially in the economic sphere, has sparked the notion in Iran as if the EU was certain that Iran would not pull out from the JCPOA and the EU was not prepared to accept the costs of countering US sanctions. This is while it benefited from Iran’s commitment to the nuclear deal under conditions that it could refuse to fulfil its obligations and in fact, by its behavior, somehow put Iran at a weak and passive position and address other issues, such as Tehran’s missile capability or its regional influence to demand more and more from Iran either on its own behalf or on behalf of the United States.

So the key question is whether the EU is truly playing a role, and while it is capable of confronting the United States in the area of ​​sanctions, it is seeking to exploit the conditions in its own interest and at the expense of Iran, through acts of innocence and procrastination? Also after getting the answer to this question, what options does Iran have to interact with the EU and what recommendations can be offered in this regard? From the perspective of the European Union, the JCPOA, as the greatest diplomatic success and its image has led to increased EU self-confidence in the world and has highly contributed to the surge of conventional regimes, including non-proliferation and arms control regimes.

According to the European Union, the JCPOA has contributed to regional stability in Europe, Eurasia, WANA, and Africa and the US administration have helped to increase the potential for conflicts in these areas through crossing numerous normative boundaries, international procedures and collective security.

According to what was said, it can be argued that the European Union has a political resolve to keep the JCPOA alive. The European Union’s political behaviour from May 18, 2018, to this day is a good yardstick to assess this claim. Following the statement made on May 9 by Federica Mogherini, she met separately in Brussels on May 15 with the foreign minister of Iran and foreign ministers of France, Germany and UK further emphasized EU’s all-out support for the JCPOA.

A press statement released by Mogherini said in part: “We, together, regretted the withdrawal of the United States from the Iran nuclear deal and we recognized that the lifting of nuclear-related sanctions and the normalization of trade and economic relations with Iran constitute essential parts of the agreement’.

  • We stressed the commitment we all share to ensure that this will continue to be delivered and we agreed to this end to deepen our dialogue at all levels.
  • Maintaining and deepening economic relations with Iran;
  • The continued sale of Iran’s oil and gas condensate petroleum products and petrochemicals and related transfers;
  • Effective banking transactions with Iran;”

The European Union, in September 2018, promised to register a special financial mechanism to advance trade with Iran and circumvent US sanctions. The mechanism was delayed time and again until on January 31, 2019, France, Germany and the United Kingdom, announced that they had set up the mechanism to facilitate legitimate trade between Iran and European companies. The tool called the Instrument in Support of Trade Exchange (INSTEX), both in the Joint Statement of the three countries and in Mogherini’s is described as a means of demonstrating the political will of Europe to maintain the JCPOA and the point that Europe is capable of acting in spite of US opposition, and reiteration of the nuclear deal’s security importance for Europe.

The European Union hopes to use the INSTEX mechanism along with the blocking regulation and the European Investment Bank’s actions to respond to Iran’s expectations for staying in the JCPOA on the one hand, and reduce to some extent the risk appetite of European companies in doing business with Iran in the announced areas.

As for INSTEX the following aspects are important:

  • With INSTEX Europe has, in fact, taken the first step towards integrating issues related to Iran (JCPOA, missiles, regional influence, alleged terrorist acts, and human rights). This integration is a desirable goal of the recent efforts of the United States;
  • The main problem in Europe in fulfilling the JCPOA obligations is not European governments but companies that have not given in to Europe’s supportive measures such as blocking regulation to date, so the above tools would not help to overcome this problem, and these companies are more likely to reject the INSTEX at its best condition;
  • With INSTEX in force, de-activation of Iran’s foreign trade which started with the sanctions will intensify and Europe will be in a better position to manage this trade;
  • INSTEX will put Europe in a better position in spite of its failure to comply with its commitments vis-à-vis the JCPOA, and in case of Iran’s continued action it may help to increase its pressures against Tehran; and
  • The entry of Europe into the higher stages of the INSTEX will probably depend on the future of the tension between Iran and the United States, as well as the improvement of US-EU relations, and will be affected by many variables that will reduce its desirable performance.

A survey of what Europe has done to keep the JCPOA going, with INSTEX being the latest, shows that Europe wants to, but cannot afford or is not ready to pay the necessary costs in this regard.

Considering Europe’s position in maintaining the JCPOA and its failure to do so the question arises as to whether Iran’s use of the EU is limited to its ability to keep the nuclear deal alive, and should it engage in all relations with Europe with a static perspective? In response, it should be said that the type of Iran’s enjoyment is not limited to the ability of Europe, and Iran has the enjoyment from the EU in various political, legal, and military, security, and even economic fields, which will bring the pursuit of the JCPOA out from zero to one position. In other words, the main advantage of Iran in this course is not the concrete economic achievements, but their indirect consequences that can be observed in the security, political and legal spheres.

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