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02/07/2019

Will INSTEX alleviate Iran’s Economic Problems?

Will INSTEX alleviate Iran’s Economic Problems?

After more than nine months of delay, the Europeans have announced the registration of their so-called economic package to convince Iran to stay in the JCPOA (Joint Comprehensive Plan of Action), which was signed between Iran and the P5+1.

The package which should have been called SPV (Special Purpose Vehicle for Iran) is now called INSTEX (Instrument in Support of Trade Exchange).

According to the promises Europeans gave Iranians about nine months ago, the SPV should have built an economic structure for European companies and corporations to circumvent the US’ illegal sanctions against Iran and convince Iran to stay in the JCPOA.

The Europeans allegedly made the decision because they were angry about the US making lone decisions and forcing Congress to agree to actions against other countries when only the UN should have the right to do so.

The Europeans also believed that, as much as the JCPOA concerns Iran, it also concerns European Countries because it was considered to be the EU’s biggest political achievement in decades. It is also a perfect representation of their ideology of solving international debates through negotiation.

The Iranians were also expecting that the European package would solve their trade difficulties and allow them to rely on the Euro as the base currency of their foreign exchange instead of the dollar. They hoped the package would even open possibilities to sell Iranian oil to Europe.

Based on the negotiations over the deal, the new package should have been able to expand trade between Iran and other countries as well.

According to European promises, the SPV should have circumvented American sanctions against Iran the same way they traded around the US Embargo against Cuba in 1992; they even promised the Iranians that they would pass a law in the EU council to stand against America taking secondary retaliatory sanctions.

Generally speaking, Europe promised to take a political and economic stand against President Trump’s decision to withdraw from the JCPOA.

But what actually happened was an extreme disappointment.

The Europeans announced that they registered another economic package in France which will be headed by a German manager and the British will control the Administration department.

INSTEX is still a working project and is currently not in operation. European leadership says that the administrative department will need a couple of months to activate the package.

According to the announcement, the package will operate only on merchandise which is not sanctioned by the US, namely Food and Medicine.

Moreover, some European countries like France are asking the Iranians to negotiate on their Ballistic missile program and threatening to impose sanctions if they don’t accept.

Iran’s answer to INSTEX and the French foreign minister’s threats was testing a cruise missile called Howaizah, which has a 1350 KM range.

The Iranians were understandably not satisfied with the package, but government officials, especially the Iranian foreign ministry, has since tried to encourage Europe to take a meaningful stand.

The Iranians did not get what they were expecting and they will see no economic benefit from the process, but their administration hopes that as a political act it could help it face its opponents domestically and maybe act as a first step for Europe toward meaningful action.

The Iranian government has hope that European countries will feel the need to show they have an independent policy. Many European countries are facing a rise of populist movements which are very concerned about their politicians adherence to, and weakness against, the US.

Iran is also counting on the existing debate between the US and larger European countries concerning the US putting pressure on smaller and weaker European nations while encouraging the UK to leave EU by offering them economic benefits.

Some Iranian politicians also hope that if they could keep the EU relatively on their and stand against Trump’s bullying until 2020, Trump may lose the elections and they could continue the JCPOA with the next American president.

The problem is that if the current political and economic situation continues and the Europeans need another nine months to take another step towards Iran, those Iranian politicians will not be in power at 2020, since Iran will also face new parliamentary elections at the end of this year and the hard-liners who come into office will not be interested in dialogue. The moderate president Rouhani, who is in favor of negotiation, will then become a lame duck.

 

 
Emad Abshenass
Journalist, writer and Political Science professor (Iran)

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