INSTEX THE DILEMNA?

The meeting in Vienna among the signatories of the JCPOA  minus the US was conceived as the last best  chance to save the historic accord. Many commentators thought it lacked the authority to provide a definitive outcome, not least because of the relatively junior level of delegations attending.

In an attempt to avoid a direct clash with the US, the countries that set up INSTEX have confusingly said that it would be "initially focusing on trade in humanitarian goods - such as pharmaceutical, medical devices and agri food goods." which are excluded under the current sanction regime.

In a statement on Friday, the EU said Germany, France and the UK have set up the special trade channel with Iran that aims to circumvent US sanctions. The Instrument in Support of Trade Exchanges (INSTEX) is a special-purpose vehicle (SPV) established in January 2019 by France, Germany and the United Kingdom to facilitate non-dollar trade with Iran. The SPV is headquartered in Paris, France

There are justifiable concerns that the JCPOA deal will collapse after the United States unilateral withdrawal from the accord last  year. It has subsequently pursued a policy of maximum pressure culminating with   punishing sanctions  which  amongst other things deny  Iran the sale of its oil.  There is also now a palpable sense that Iran and the US could end up in a calamitous conflict which will have dire consequences for  the rest of the  region.

The Iranian Ministry of Foreign Affairs spokesman Abbas Mousavi  said despite supporting Iran in several statements, the remaining signatories - the United Kingdom, France, Germany, China and Russia - failed to take any action to shield Iran from US sanctions.

The Vienna meeting was said to have made progress but the Iranians take the view if they cannot sell their oil the JCPOA has no benefit to them . Iran's Deputy Foreign Minister Abbas Araqchi went on to say   "It was a step forward, but it is still not enough and not meeting Iran's expectations, I don't think the progress made today will be enough to stop our process but the decision will be made in Tehran."

"France, Germany and the United Kingdom informed participants that INSTEX is operational and available to all EU Member States and that the first transactions are being processed".

Amid a war of words with the Trump administration Tehran has threatened to breach the limit of its stockpile of low-enriched uranium mandated under the deal in response to the US  policy of ‘maximum pressure’. It has so far failed to make good on its threats. The US has been steadfast in its demand that Iran must renegotiate the JCPOA prior to sanctions being lifted.

A fully functional INSTEX would relieve the maximum pressure created by US sanctions effectively nullifying US sanctions. The Iranians maintain  that for  INSTEX to be sufficient it would need to expand to cover a wider range of goods in order to satisfy Iran.

"For INSTEX to be useful for Iran, Europeans need to buy oil or consider credit lines for this mechanism otherwise INSTEX is not like they or us expect," the Deputy Minister  said.

The payment system, which would act as a middleman in trade between Iran and European companies and reduce the need for direct transactions, had been widened to include more countries beyond the UK, France and Germany, he added.

An increasingly belligerent China oppose the US unilateral sanctions. China's delegate at the Vienna  talks, Fu Cong, said Beijing would continue to import Iranian oil despite Washington's sanctions on Tehran.

"We reject the unilateral imposition of sanctions," he said. "For us, energy security is important and the importation of Iranian oil is important to Chinese energy security and also the livelihood of the people."

Despite China’s position European companies are wary of inviting secondary sanctions from the US with most reluctant to incur the wrath of US under any circumstances.

INSTEX was always going to be a contentious proposition which has the potential to create a schism between Washington and its Allies. The Trump Administration have made it very clear that they will employ secondary sanctions on any company breaching their sanctions with Iran. Brain Hook U.S. special envoy for Iran said on Friday.   "We will sanction any illicit purchases of Iranian crude oil." The chess playing Iranians with their utterances in the wake of the meeting and their declared deadlines which Washington has called ‘nuclear blackmail’, also seek to place the ‘Allies’ under maximum pressure.

All this comes at a time when both the US Senate and the UK law courts have blocked arms sales to Saudi Arabia. Whilst President Trump will ultimately veto Congress and the UK government will appeal the judgement of the UK law courts, this could not come at a worse time for US Sunni Allies in the Middle East.  These are the Allies that are supposed to lead any coalition against Iran and in Saudi Arabias case, Iran’s most implacable foe likely to receive the brunt of any Iranian malign behaviour.

The special relationship between Riyadh and Washington has been predicated on a shared understanding of a geopolitical reality far removed from the domestic ethical  exigencies of western liberal democracy. If the Gulf Sunni states are unable to rely on the US or the UK for arms, I am certain Russia harbour no such moral rectitude. This along with OPEC+ could be the beginning of a new geopolitical reality.

In any event it is looking increasing more likely that INSTEX will be the rock which will shatter the JCPOA and not the one which it will be built upon