France, Germany, UK Launch a New ‘Non Dollar’ Mechanism to Trade with Iran

Patrick Henningsen
21st Century Wire

Money talks, and no one knows this better than the current occupant of 1600 Pennsylvania Avenue. It’s how the Trump Administration is projecting power these days – with powerful long-range financial instruments. Now Europe is moving in to break Washington’s blockade.

After ripping up the JCPOA Iran Nuclear Deal in May 2018, the US began constructing a comprehensive global economic blockade designed to starve and break the Iranian economy. Washington has also also vowed to sanction anyone who dared to trade with Iran. After the collapse of the previously proposed alternative clearing mechanism for financial transactions for avoiding using the US dollar, the Special Purpose Vehicle (SPV), any chance for an economic lifeline for Iran seemed to be off the table. However, Europe seems to be determined to try and bypass the ramparts of American economic statecraft.

This week France, Germany and the UK have announced the creation of a new payment system is called INSTEX – short for ‘Instrument in Support of Trade Exchanges’, to be based in Paris. This new improved version of the previous ‘SPV’ vehicle is ready to facilitate “legitimate trade” with Iran, with an initial focus on crucial goods like food and medical supplies. Later on, organisers hope to expand its capabilities to cover all goods and services. In their official joint statement, the working group have indicated that they will seek to expand the number of countries using this new channel.

Corporate Concerns

In light of this week’s INSTEX announcement, the question now remains whether of not Mnuchin’s sanctions armada will pursue European country attempting to bust Washington’s unilateral measures. While the INSTEX may provide the framework for a viable work-around, it is still yet to be seen just how many companies will want to risk drawing the gaze of Washington’s financial Finally, eye of Mordor. In other words, a company like Thyssenkrupp could deliver product to Iran via INSTEX, but by doing so they may risk losing their access to the lucrative US market should Mnuchin decide to attack the German corporation. This same risk applies to small to medium size enterprises too.

Immediately after the Special Purpose Vehicle, or “SPV” idea was floated in Brussels, the US immediately began threatening to sanction anyone who defied its decree by tcontinuing to trade with Iran. France, Germany and the EU itself, had vowed to bust Trump’s Iran sanctions through the SPV.  This is an important concept, because it signals the first deliberate move by major state actors to move away from the US dollar as a world reserve currency. The reserve currency issue is paramount because it’s one of the fundamental prerequisites in transitioning from a unipolar world order with America in the cat bird seat, to establishing what many analysts and international relations scholars refer to as a ‘multipolar world order’ with power-sharing arrangements among ‘multiple equals.’ Naturally, the US was having none of it, and proceeded to threatened to sanction the international inter-bank financial messaging clearing system known as SWIFT, based in Belgium. Trump’s éminence grise and master of the coin, Treasury Secretary Steve Mnuchin, then threw down the gauntlet saying, “We have advised SWIFT that it must disconnect any Iranian financial institutions that we designate as soon as technologically feasible to avoid sanctions exposure.” And that was that. No more SPV for the Europe’s multipolar crusaders.

Will INSTEX meet a similar fate? That depends on whether the European partners have the political will and determination to see this initiative through to the end. Washington is certain to launch a counter move in order to try and intimidate western corporations from participating in trade with Iran, so onus is really on France, Germany and the UK to prove they have the stones to stand to Trump and be ready to elevate this issue to the UNSC level – and openly challenge the US on principle, and international law, something it has not yet been willing to do, and thus leaving any independent EU gestures to remain merely symbolic and ‘good natured’, but never implemented properly. They could start by asking Washington and Tel Aviv, where is the evidence that the US and Israel claim to have and which that proves that Iran is in breach of the JCPOA by still pursuing a nuclear weapon? Team Europe has to be ready to tell Trump: put up, or shut up. If they aren’t, then their status as an offshore outpost for the US will persist.

Worse than that, the EU will continue to be a paper tiger in terms of its federalist foreign policy aspirations. If Brussels and its member states are unable to pursue a foreign policy independent of Washington’s, then it’s another nail in the coffin of the European Project.

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Author Patrick Henningsen is an American writer and global affairs analyst and founder of independent news and analysis site 21st Century Wire, and is host of the SUNDAY WIRE weekly radio show broadcast globally over the Alternate Current Radio Network (ACR). He has written for a number of international publications and has done extensive on-the-ground reporting in the Middle East including work in Syria and Iraq.

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