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As Pressure Mounts, Doubts Surround Future of Mechanism for Evading Iran Sanctions

As Pressure Mounts, Doubts Surround Future of Mechanism for Evading Iran Sanctions

By Edward Carney

On Sunday, the Washington Post published a new report describing the contrary pathways that the United States and the European Union are taking in their policies for dealing with the Islamic Republic of Iran.

While the US continues to increase pressure on the Iranian regime in line with President Trump’s withdrawal last May from the 2015 Iran nuclear deal, the EU remains committed to preserving that agreement, and is reportedly on the verge of implementing a special payment mechanism for evading the secondary sanctions that came back into force in November.

Last week, the Associated Press published a similar report, noting that the US Treasury had imposed even more sanctions, targeting two Iran-backed militias in Syria and a commercial airline that was accused of contributing to smuggling operations associated with the Iranian Revolutionary Guard Corps. In the meantime, the White House was reportedly putting European partners “on notice” over prospective sanctions avoidance, insisting that there would be stiff penalties for carrying through with the EU’s plan.

The AP indicates that these warnings did not appear to deter European supporters of what has come to be known as the Instrument in Support of Trade Exchanges, or INSTEX. This “special purpose vehicle” for Iranian transactions is expected to be registered in France under the direction of a German official, with additional stakeholders from the United Kingdom. However, questions have lately emerged about the practical impact of the mechanism’s formal launch.

These questions first became prominent after the UK and France, in their capacity as permanent members of the United Nations Security Council, called for a meeting over Iran’s persistent ballistic missile activities. Later, the EU imposed sanctions on the Iranian intelligence service in response to planned assassinations of Iranian opposition activists on European soil. These developments encouraged doubts about the extent of the EU’s commitment to defending Iran’s interests, and they roughly coincided with downgrades in the description of anticipated INSTEX operations.

The Washington Post repeated these lower expectations in its report on Sunday, noting for instance that European officials who are close to the issue have acknowledged that the effects might be “minor” at first, and that the payment vehicle would initially deal with transactions that are already permitted under the US sanctions, such as those involving food and medicine.

The AP suggested that American officials may be concerned about INSTEX or a related payment mechanism challenging the current, US-linked international banking transfer system known as SWIFT. But this is a far-off outcome and it depends on tremendous success for INSTEX in the near term, something that is far from being a foregone conclusion according to the Post.

In fact, while the new payment mechanism is intended to save the nuclear deal, or Joint Comprehensive Plan of Action, from the existential threat associated with American withdrawal, European officials have reportedly expressed skepticism about whether the deal can be saved at all. To a great extent, this is up to the Iranian regime, but its officials have responded to American pressure by raising their expectations for European countermeasures, rather than lowering them.

The Post quoted Ahmad Jannati, the chairman of Iran’s Assembly of Experts as saying, “Some imagined that they could rely on the Europeans when the U.S. withdrew from the JCPOA. The Europeans, however, are dragging their feet and [will] do nothing in our interest. The Europeans are worse than the Americans.”

This goes to show that Tehran likely expects much more from the EU than its support for INSTEX. And this in turn supports the Post’s observation that that alone will not be a determining factor in whether Iran remains in compliance with the JCPOA over the long term. Many prominent voices in Iranian politics are urging the cancellation of the agreement, which hardliners regard as a betrayal of the regime’s longstanding reputation as a bulwark against Western influence in the Middle East.

And whether or not those voices succeed in prompting Iranian withdrawal, they are likely to prevent the Islamic Republic from offering anything of value to encourage greater conciliation from European partners.

On Monday, a report by Reuters made this clear, in that it quoted Sadeq Larijani, the head of the Iranian judiciary, as rejecting supposed preconditions set by the JCPOA’s European signatories in advance of the INSTEX launch. Although European diplomats insisted that there was no such precondition – only “a strong expectation” – the dismissive reaction is a window into the Iranian regime’s mindset for future dealings with the West.

“Iran will never accept their strange and humiliating conditions of joining the FATF and negotiations on its missile program,” Larijani said via Iran’s Tasnim News Agency. He was referring, in the first place, to the Financial Action Task Force, which sets standards for the avoidance of money-laundering and other financial crimes among its member states.

To whatever extent the European participants in INSTEX expect Tehran to comply with FATF standards, it is not a new condition. Legislation to that effect has faced roadblocks after passing through the Iranian parliament, because hardliners worry about the effect on Tehran’s support for Hezbollah and other militant groups. Yet the passage of that legislation has long been understood as a precondition for Iranian access to SWIFT. Thus, the absence of such a precondition for INSTEX access would represent a significant additional concession to the Islamic Republic.

Meanwhile, Larijani’s statement regarding ballistic missiles does not seem to reflect any specific statement made by European diplomats or officials. It does, however, reflect what Reuters describes as worsening relations between Iran and Europe, which has EU member states contemplating new sanctions on the Iranian ballistic missile program.

Although the development and testing of such weapons is not addressed by the JCPOA itself, the corresponding UN Security Council resolution calls upon the Islamic Republic to avoid all work on nuclear capable weapons, but Tehran has since insisted that compliance with that provision is optional and that Iranian ballistic missiles are not expressly intended to carry nuclear warheads.

This, of course, has been little consolation for Western policymakers who are concerned about belligerent Iranian activities at a time when future relations with the regime are very much up in the air. Another Reuters report indicated on Monday that the EU had issued a “rare joint statement” reiterating its worries about the Iranian ballistic missile program and noting that the regime “continues to undertake efforts to increase the range and precision of its missiles, together with increasing the number of tests and operational launches.”
“These activities deepen mistrust and contribute to regional instability,” the statement added, using language that is reminiscent of the Trump administration’s calls for greater international confrontation of the Islamic Republic. The Washington Post quoted one expert with the European Council on Foreign Relations as saying that in certain areas, presumably including the area of ballistic missile development, “Europe is eager to show the United States that it can be tough on Iran.”

Although this desire appears far from overriding the European effort to preserve the JCPOA, it does contribute to a situation in which, according to the Post and other outlets, the EU’s pushback is relatively weak in comparison to the American efforts to enforce economic sanctions and compel private entities to avoid doing business with the Islamic Republic. What’s more, as Iran refuses to compromise over issues such as money laundering and ballistic missiles, it may push Europe to either tolerate or actively participate in a larger share of those American efforts.

With Tehran currently celebrating the 40th anniversary of the Iranian Revolution, there could be further growth in avenues for the regime’s defiance of international will. This was the implication of state media broadcasts on Saturday, which marked the start of those celebrations in part by boasting of the successful testing of a new cruise missile that is reportedly capable of flying at low altitudes over a range of 800 miles before accurately striking a target.

Fox News quoted Iranian Defense Minister Amir Hatami as calling this Hoveizeh cruise missile the “long arm of the Islamic Republic of Iran,” and the Long War Journal provided expert examination of his claims and the underlying rhetoric. The latter report noted that cruise missiles are now the declared focus of the Iranian Revolutionary Guard Corps’ Aerospace Force and it suggested that official statements may actually be downplaying the range of the weapons in order to support the regime’s dubious claims that its ongoing military buildup is purely defensive in nature.

The Long War Journal concludes its reporting by criticizing the complacency that European powers have arguably been demonstrating in the midst of their efforts to preserve the JCPOA and resist American efforts to build an anti-Iran coalition. “An overemphasis by the West on seeking to check Tehran’s ballistic missile program has led to inattention to Iran’s cruise missile capabilities and intentions, which is an evolving threat,” the article stated before advising that Washington – and by extension its European allies – should take proactive steps to address that threat and prevent further illicit weapons development by the Islamic Republic.

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