News : Sanctions
- Published: Thursday, 30 May 2019
By Abdolrahman Mahabadi
On Wednesday, the Washington Post discussed the itinerary for US Secretary of State Mike Pompeo’s pending trip to multiple European countries, and it emphasized that Iran is expected to be a major topic of discussion during that tour. His plans include an unusually long three-day stay in Switzerland alone. That country’s embassy in Tehran handles consular affairs for the United States, which has no diplomatic relations with the Islamic Republic, and discussions between Pompeo and Swiss officials could very well include matters related to the half-dozen US nationals currently known to be held hostage by the Iranian regime.
But the rest of Pompeo’s tour will almost certainly be viewed as a significant opportunity to continue exerting pressure on America’s European allies to limit their relations with the Islamic Republic and help support the White House’s defined strategy of “maximum pressure.” Visits to Germany and Britain will provide the Secretary of State, and in the latter case President Trump as well, with opportunities to reaffirm the administration’s position on the financial mechanism that has been established as part of an effort to provide Iran with incentives for remaining a party to the 2015 nuclear deal from which Trump withdrew last year.
As fellow signatories to the Joint Comprehensive Plan of Action, Germany, Britain, and France are working to keep the agreement in force without American participation. During that time, Tehran has variously threatened to renege on its own commitments it if fails to see adequate financial benefit. And in recent days, the regime even went as far as announcing that it was no longer abiding by limits on its stockpiles of nuclear material, and would soon begin enriching uranium to a higher level of purity.
In the interest of forestalling such outcomes, the three European countries jointly established the Instrument in Support of Trade Exchanges, or Instex, early this year. Although it has never become fully functional, the payment mechanism would ostensibly allow Iran and its European partners to transact business while avoiding the US financial system. But experts have expressed doubts about the prospective effectiveness of the system, and the White House has warned that banned transactions would result in penalties regardless of the mechanism involved.
On May 7, Sigal Mandelker, the US Treasury Department undersecretary for terrorism and financial intelligence, sent a letter to the head of Instex saying in part, “I urge you to carefully consider the potential sanctions exposure of Instex. Engaging in activities that run afoul of U.S. sanctions can result in severe consequences, including a loss of access to the U.S. financial system.”
Such warnings have apparently already had a substantial impact on the willingness of European firms to continue doing business with Iranian partners. But a recent report by Iran Daily suggests that that impact has been incomplete. Specifically, the report claims that half of the 120 German firms that were previously active in Iran are still there. Still, the reduction is matched by a 50 percent decline in the volume of German imports to Iran, relative to last year. Iranian imports to Germany have similarly fallen by 42 percent, and virtually all European entities have stopped purchasing Iranian oil.
Pompeo and the rest of the Trump administration are unquestionably committed to growing these sorts of figures, and they may find it increasingly easy to do so as Iran steps up its threats against the JCPOA while also taking other provocative actions in the Middle East and the world at large. Each of the three European signatories have voiced frustration, for instance, with Iran’s unwillingness to halt its ballistic missile development and testing, as it was expected to do under the terms of United Nations Security Council Resolution 2231.
So far, neither these actions nor the Trump administration’s pressure have been sufficient to convince Germany or its partners to draw back from the Instex plan. But such actions continue to proliferate, and as more attention is focused upon them it may prove more difficult for European policymakers to argue against the maximum pressure strategy.
As one example of this trend, Fox News reported on Tuesday that a report by German intelligence had recently pointed to the Iranian regime’s persistent ambitions for the development of a nuclear weapon. Referring to various efforts at the procurement of technology with military applications, the Bavarian Office for the Protection of the Constitution wrote that Tehran is presently “making efforts to expand its conventional arsenal of weapons with weapons of mass destruction.”
Close US allies may prove sensitive to these sorts of indications of growing threats to Western interests. But the same likely cannot be said of countries like China that have lately maintained closer alliances with the Islamic Republic, but whose cooperation is nonetheless necessary to achieve the stated goal of “maximum pressure.”
China is one of eight countries that were given waivers for sanctions on Iranian oil purchases after these sanctions were re-imposed by the White House last November. The Trump administration declined to renew these waivers before they expired in May. But as of April, Chinese purchases of Iranian oil actually increased 46 percent respective to the previous month and 21 percent respective to the same time last year.
On Wednesday, Marc Short, the chief of staff to Vice President Mike Pence, used an interview with CNBC to highlight the sorts of demands that are now being made of China. He explained that China’s Huawei Technologies Company had recently been made subject to criminal charges in US court because of its illicit relationship with Iran, and that this relationship would need to end once and for all if Huawei is to be included in any future trade deal between Iran and the US.
But Short also noted that Huawei is “more or less a wholly owned subsidiary of the Communist Party of China,” and thus unlikely to be more amenable to American demands than the Chinese government is. Underscoring the challenge that the US faces in this area, the ANI news agency quoted Pang Sen, China’s ambassador to Iran, as saying that he foresees the future decline of American power and would view this as a positive development for both Tehran and Beijing.