Is the European Mechanism for the Iranian regime in Coma?

Is the European Mechanism for the Iranian regime in Coma?

EU Special Purpose Vehicle

Analysis by PMOI/MEK

Nov. 18, 2018 - The “European package”, the “European mechanism”, or more recently the “European financial channels” have been the area of constant struggles and fights between different factions of the Iranian regime and also the Iranian regime as a whole with the EU.

On November 14, Karimi Qoddusi, member of the security commission in the Iranian regime’s parliament, attacked Rouhani saying: “The EU has given [foreign minister Javad] Zarif and the foreign ministry team and Rouhani’s person nothing except for issuing a declaration five months after the U.S. left the JCPOA.”

Zarif also accused the European Union and said that they are not willing to pay a political price for keeping the JCPOA.

In short, five months after the U.S. exited the JCPOA, the European version of the agreement was supposed to replace it. But it is in an elusive state as the European package, after much waiting, shows. This has raised questions both inside the Iranian regime and on the international level.

Where does the European mechanism stand right now?

 

The European mechanism: the odyssey between words and deeds

On August 6, Rouhani said: “The Europeans have paid the utmost price politically, made statements, talked and passed regulations and have clearly called America’s actions unacceptable.”

Rouhani himself was fully aware that the Europeans just used rhetoric.

They “should plan practically how they want to compensate for America’s exit,” he added.

Three months later Zarif says that “the Europeans are still not ready to pay a political price for keeping the JCPOA.” Araghchi, Zarif’s deputy, says that “we’ve respected our commitments according to the JCPOA and expect the European Union to implement its economic commitments according to the JCPOA in addition to respecting its political commitments. [That’s] because Europe’s measures until now have not yet lead to functioning solutions.”

Reuters reported on November 15 quoting Brian Hook, the U.S. State Department’s Special Representative for Iran, saying that European banks and firms that engage in a special European Union initiative to protect trade with Iran will be at risk of newly reimposed U.S. sanctions.

“European banks and European companies know that we will vigorously enforce sanctions against this brutal and violent regime,” he said in a telephone briefing with reporters.

 

What is the safety factor of the U.S. waivers?

Considering the wide range of U.S. sanction waivers—most importantly in the energy sector allowing eight countries to import Iranian crude oil—and the European mechanism, won’t the Iranian regime be able to shield itself from the economic consequences for some time?

It’s important to note that the waivers are very limited, both in terms of applicable time and scope.

Countries that get waivers under the revived sanctions must pay for the oil into escrow accounts in their local currency. That means the money won’t directly go to the Iranian regime, and it can only be used to buy food, medicine or other non-sanctioned goods from its crude customers.

Analysts widely consider the waivers temporary precautions to prevent oil prices to dramatically rise while buyers have time to adapt and find new energy sources.

 

Where is the European Special Purpose Vehicle’s (SPV) office located?

Up until now, no European country has been willing to host the SPV, fearing U.S. sanctions. Austria has publicly declined the European Commission’s request to host the SPV while Belgium and Luxembourg are reportedly among the countries who’ve quietly turned down the possibility of hosting the SPV.

The Financial Times sums it up in a comical way: “So up to now, the [European] commission has been unable to find a home for the SPV. Not even a post restate address. No EU country has offered to host it. The sad SPV has been wandering between railway stations and airports, without a nationality, a bank account or even a real name. If I passed it on the street, I would put a euro in its hat.”

Is Europe serious in its endeavor to help the Iranian regime?

The whole highly publicized ups and downs of the European initiative to counter U.S. sanctions on Iran begs the question whether the EU is serious in its quest to play the hero in rescuing the Iranian mullahs.

The short answer is: yes and no! Here’s the long answer:

It’s only reasonable to assume that the EU—or more accurately the dominating school of policy that advocates of appeasement with the theocracy ruling Iran as the only realistic means to deal with the mullahs, represented by its high representative for foreign affairs and security policy, Frederica Mogherini—acts out of self-interest. It’s also self-evident that the EU as a whole, and on a lower level its member countries, have a colorful set of interests that can roughly be categorized in a hierarchy in which Iran takes a rather tiny place near the base.

There are two distinct types of interests that the EU harbors in the Iran deal: Economic and political. Economically, the EU has a much greater stake than the U.S. in trading with Iran, but at the same time, its economic interests in trading with the U.S. dwarfs the former by orders of magnitude.

Politically, the EU likes to paint itself as an independent and strong coalition that isn’t coerced by extraterritorial U.S. sanctions. This would potentially give the Union a better position in future negotiations both with the U.S. but more importantly with countries opposed to the United States. On a national level, some European leaders are also eager to paint themselves as strong leaders who are able to counter the U.S. They calculate that such a flair will resonate more with their power base giving them an edge in the next election.

But Europe is also heavily dependent on the U.S. for its security and economic prosperity. And that makes the European position the result of an optimization equation which aims to stretch the cost-benefit ratio as much as possible in its favor.

And so, Considering the U.S’. apparent willingness to enforce the Iran sanctions at virtually all costs, it’s all too natural for European countries to balk at the idea of hosting the SPV on their soil.

 

The Iranian people’s role in the regime’s foreign policy dead-end

January this year, shortly after the popular uprising that reached most major Iranian cities, Ali Khamenei, the regime’s Supreme Leader, said in his first remarks about the protests: “Enemies will land like flies on injuries of difficulties and weaknesses. Therefore, you should heal the injury and don’t let it happen, because if we don’t have internal problems, the propaganda machine of foreigners won’t have any impact and the Americans can’t do a damn thing.” Later in his speech, Khamenei clarifies that with “injuries” he means the “weaker classes who are under [economic] pressure.”

The popular uprisings that flared up across the country this year were mostly composed of the poorer classes of the Iranian society, a population that the regime has historically presented as its base of power.

Late in August, Rouhani mentioned the same dilemma the Iranian regime faces. In a speech in the Iranian parliament, he said that everything was according to its normal and natural routine until the country’s climate changed in December 2017 and some people started to cry disruptive chants in the streets.

In fact, the 2017-2018 popular protests in Iran were the beginning of a series of developments, on every level concerning the Iranian regime, which led to the current situation.

And that’s a good thing. Both because the Iranian people show their willingness and need for fundamental change on a massive scale despite a ruthless crackdown by the regime, and because it makes the cost to benefit ratio equation for Europeans, and other countries for that matter, who wish to make a quick gain out of the current and future interests of the Iranian people, to think twice about the costs before committing to anything serious.