EU Defied US over Iran’s Nuclear Program with INSTEX. Was It Worth It?

EU Defied US over Iran’s Nuclear Program with INSTEX. Was It Worth It?

INSTEX has created a dangerous precedent that can ruin future Western sanctions, while also disgruntling everybody.

The Iranian nuclear program has been with us as a major issue in world politics for nearly two decades now.

In my case, it has been around ever since I started studying international relations, and has been invariably present literally in every IR course I ever took.

The Iranian nuclear deal – technically known as the Joint Comprehensive Plan of Action (JCPOA) – signed in 2015 by Iran and the 5+1 powers (China, France, Germany, Russia, the UK, and the US) – together with the European Union has been celebrated as finally a step providing an option to evade an impending military conflict. That has been the main reason it has been celebrated by the Obama Administration as one of its landmark achievements.

The decision of the next US President, Donald Trump, to withdraw the United States from the JCPOA (Iranian nuclear deal) in May 2018 has tossed a new bone of contention in Trans-Atlantic relations as the three major European powers, France, Germany, and the UK, as well as the EU, were vastly disappointed by that move.

As Trump has kept slapping new sanctions at the Iranian government, the EU powers have made declarations they would keep upholding the 2015 nuclear deal, and have even taken actual moves to cushion the blow the US sanctions and thus ensure that the deal would survive, and Iran would abstain from enriching uranium to weapons-grade levels, while the European trade with Iran will remain uninterrupted.

The most notable of those has been INSTEX – Instrument in Support of Trade Exchanges – a European special purpose vehicle (SPV) designed precisely to keep trade with Iran flowing through barter and non-USD, non-SWIFT transactions, while shielding both EU and Iranian companies from US sanctions.

France, Germany, the UK, and the EU have been cautious enough so as to limit the SPV to goods that aren’t targeted by US sanctions anyway – food, medicine, and medical equipment, i.e. humanitarian goods.

Thus, INSTEX and the supporting rhetoric and diplomatic moves of the EU and its major powers have been supposed to serve multi-pronged goals: prop up the 2015 Iranian nuclear deal, assuage the Iranians’ anger over the new US sanctions and America’s withdrawal from the deal, make a powerful foreign policy statement that the Europeans can do major stuff on their own, all the while trying to avoid infuriating the United States to an unnecessary level.

Has it been worth it?

Any economic and trade benefits to European economies aside, which aren’t probably that huge to begin with, in political terms, I believe the answer is more negative than positive.

The fact of the matter is that INSTEX and the entire EU foreign policy initiative has annoyed everybody, failed to convince anybody in the EU’s unconditional worth and unity as a foreign policy player, and on top of that it has created a dangerous precedent as to how Western sanctions, in this case US sanctions, can be avoided, thus potentially depriving the West (whenever it is unified as such) of a powerful instrument in world affairs.

Somehow INSTEX has annoyed both the United States and Iran. None of these two power players is happy with it.

Washington understandably so – it’s most crucial allies in NATO, from the EU (largely its own creation in post-World War II Europe), its few fellow Western powers have openly defied it far beyond just expressing their disagreement with the respective unilateral US foreign policy move (Trump’s withdrawal from the JCPOA in 2018).

It is true the Americans and the Europeans have often been in disharmony since the good old days of George W. Bush, and that Trump has somehow managed to take that to an entirely new level.

However, INSTEX is probably the first time the EU and its major powers have generated an entire special structure to the benefit of a non-Western power that their main ally, the United States, considers hostile. The fact that INSTEX is limited to humanitarian goods is certainly accounted for in Washington, D.C., but that doesn’t cancel its wider perception by America’s ruling elite: the Europeans are openly helping a “hostile” power evade American sanctions.

Sure, Trump’s withdrawal from the 2015 Iranian nuclear deal was probably wrong, and probably will prove even more wrong further down the road. But did the Europeans have to go to such great lengths so as to create a SPV specifically designed to circumvent US sanctions?

Then comes the next great discontent – Iran, the supposedly “hostile to the US” power that INSTEX is supposed to placate.

Iran’s leadership probably should have just declared it was going to abide by the 2015 JCPOA regardless of America’s withdrawal from it but it has decided to go for bolder moves and bolder statements.

It has made clear its displeasure with the limited scope of INSTEX time and again, time and again. As though that isn’t enough, at one point in the spring of 2019, the Iranian leadership even gave the EU a 60-day “ultimatum” to guarantee it won’t be hit hard by the new US sanctions.

Then at the end of June and early July, Iran first declared its intention and then openly violated the JCPOA by starting to enrich uranium beyond the level specified in the 2015 deal, though nowhere near weapons-grade level – just to send a message, as a demonstration of its decisiveness.

If the power INSTEX had been supposed to placate has been so unhappy with it, what was the point of launching it?

The other hope of the European architects of INSTEX has probably been that it would also send a message that the EU and its major powers can act together in top-level world power politics, without the United States, and even in open defiance of it.

Well, sure, they can – except nobody can be led to believe just because of INSTEX that the EU is a full-fledged, unified world power against the backdrop of all the discords or just simple lack of coordination among EU member states, not to mention Brexit in which one of the top three EU powers has decided to leave the Union.

On top of that, INSTEX has set up a dangerous precedent showing a model or at least a way of how powers hostile or just at odds with the West can avoid Western sanctions with non-USD, non-SWIFT transactions, and barter exchanges.

Not that they are unable to conduct trade in other currencies or come up with mechanisms of their own, but with INSTEX we’ve had one part of the West institutionalize such a model and show the Rest how to evade sanctions from another part of the West.

The keen interest on part of Russia and China in joining INSTEX is a case in hand.

So perhaps there will come a time when the West – North America + (Western) Europe – will decide to act with one voice, unanimously, in some major international crisis, it will resort to its sanction tool, and then the respective sanctions will be avoided at least partly based on the INSTEX model.

In other words, it is probably not advisable for the EU to try to erode the role of the US dollar as the preeminent international currency because that would weaken the West’s leverage if it decides to use sanctions unanimously in the future.

Great French leader Charles De Gaul once said that “the Americans will do all the stupid things you can think of, plus some which are beyond imagination.” (Never mind that his native France was liberated from the Nazis primarily by US troops.)

Trump’s withdrawal from the JCPOA might or might not be one such thing.

But given its shaky unity on foreign policy, the fact that the supposed beneficiary (Iran) has remained disgruntled, that their longer-term top ally (the United States) have gotten irritated, and that it can undermine future attempts to use all-West sanctions against opponents, this might have been just another case in which the EU and its major powers should have stuck to verbal condemnation of America’s unilateral actions.

For the time being, and at least in political and diplomatic terms, INSTEX does not seem to have been worth it, and that’s just when hoping that it hasn’t opened a can of worms.

Ivan Dikov

(Banner image: Wikipedia)

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