War of Sanctions against Iran (II)

Secondary Sanctions

"We deeply regret" [1] was the reaction Germany's Foreign Minister, Heiko Maas, his counterparts from France, and Great Britain, and the EU's High Representative for Foreign Affairs and Security; Federica Mogherini expressed concerning US President Donald Trump's decision to immediately penalize any violation of the unilaterally re-imposed US sanctions on Iran. Six months ago, Washington had issued "special permits" to allow continued importation of Iranian oil to eight countries for which the importation was highly important. These permits have now expired and will not be renewed. Companies persisting in buying Iranian oil must now expect US reprisals. The threat of coercive measures is a blatant violation of international law. Three of the "special permits" countries - Italy, Greece, and Taiwan - have already terminated their Iranian purchases. Japan and South Korea have also greatly reduced theirs. How China, India, and Turkey will react remains uncertain.

The Grey Market

Turkey, which in 2017 was importing 44.6 percent of its oil and 18 percent of its gas from Iran, is probably the country hardest hit by US threats. Even though Ankara has declared it will not let Washington dictate its commercial partners, observers, however, see such statements as aimed at domestic consumption. In fact, the Turkish government, whose relations with the USA are already tense, can hardly afford supplementary conflicts, and therefore will have to submit. The Turkish energy expert Necdet Pamir was quoted saying that "the loss of the Iranian oil can be compensated for particularly with oil from Russia and Iraq."[2] India and China's situations are also problematic. According to speculations, at least China, with the help of companies, not dependent on US business, can continue to import a certain quantity of Iranian oil, even though less than previously. Iran is confident that it can export large volumes via the so-called grey market, without being more precise - for obvious reasons.[3]

INSTEX

Over the weekend, the foreign ministers of the three most powerful EU countries along with the EU High Representative for Foreign Affairs and Security announced their intentions to undermine the USA's illegal sanctions and to "work to maintain and foster Iran's flow of finances and exports."[4] The objective is to "facilitate the continuation of legitimate trade with Iran" by means of the INSTEX financial vehicle. "The Instrument in Support of Trade Exchanges" (INSTEX), which was established in Paris at the beginning of the year, and directed by former Commerzbank manager Per Fischer for the first six months, is based on the barter system. It will charge the Iranian companies' demands against those of European companies, to circumvent the regular payment transactions of banks threatened by US sanctions. Until now, INSTEX was seen as inoperable,[5] which has been confirmed by the fact that trade between the EU and Iran has dramatically collapsed. Already in November 2018, when the US sanctions were re-implemented, trade slumped by more than 66 percent in relationship to the same month the previous year.[6] In addition, the two EU countries - of the eight countries that paid for "special permits" - were the first to completely halt their purchase of Iranian oil. If INSTEX would have achieved even half of its objective, this would not have happened.

"Legitimate Trade"

To finally make progress, the foreign ministers of the three EU countries and the EU's High Representative for Foreign Affairs and Security have now announced that they will intensify their efforts and "significantly increase their financial contributions into the INSTEX operational budget."[7] "All countries, including Russia and China," as signatory states to the nuclear agreement with Iran, are encouraged to "continue to pursue" the "legitimate trade" with that country "as best they can, with concrete steps." It has been announced that specialists from the foreign ministries of Germany, France, Great Britain, Russia, China, and Iran will meet tomorrow in Brussels, to decisively seek solutions for maintaining or relaunching bilateral trade. Beijing has promised to also use INSTEX, if the EU's finance vehicle ever becomes operable.[8]

Inner-Western Differences

Berlin and Brussels' initiative was provoked by the fact that US attempts to bring down the Iranian government run counter to Germany's Middle East policies. The German government seeks to not only open up Arab markets, but Iranian as well for German industry, and seeks to establish a balance between Riyadh and Teheran. (german-foreign-policy.com reported.[9]) This would have been possible, if the nuclear agreement would be observed; however, the Trump Administration seeks, in cooperation with Riyadh, to trim the Middle East to the pro-American line. Therefore, Berlin is distancing itself from Washington's Iran policy, even occasionally holding the option of pragmatic cooperation with Moscow and Beijing open, to be able to assert itself in the Middle East in opposition to the Trump administration. So far, however, without success.

[1] E3-/EU-Statement zum Iran-Atomabkommen. auswaertiges-amt.de 04.05.2019.

[2] Volker Pabst: Die amerikanischen Sanktionen gegen bereiten Ankara Kopfschmerzen. nzz.ch 04.05.2019.

[3] Iran has mobilized all resources to sell oil in "grey market": State media. cnbc.com 05.05.2019.

[4] E3-/EU-Statement zum Iran-Atomabkommen. auswaertiges-amt.de 04.05.2019.

[5] See also Weltpolitik unter Druck.

[6] Iran-EU-Handel sinkt im November um 66 Prozent. owc.de 23.01.2019.

[7] E3-/EU-Statement zum Iran-Atomabkommen. auswaertiges-amt.de 04.05.2019.

[8] Gareth Smyth: Iran And China: Between Oil And Trump. lobelog.com 24.04.2019.

[9] See also Eine neue Ära in Mittelost (III) and Golfkrieg gegen China.