Connect with us

Europe

EU sets in motion special mechanism against US sanctions

Published

on

According to French Foreign Minister Jean-Yves Le Drian, the EU’s updated Blocking Statute mechanism of maintaining financial, economic and trade relations with Iran, aimed at mitigating the impact of Washington’s sanctions on EU companies doing business with Tehran, will take effect within the next few days.

However, the French minister stood corrected by Reuters, which said that the EU mechanism would only be launched the next few days and could take several months to start working in earnest as many details still remain to be agreed.

The Special Purpose Vehicle (SPV) is part of EU efforts to protect and keep in place the Joint Comprehensive Plan of Action (JCPOA), commonly known as the nuclear deal with Iran.

On July 14, 2015, Iran and six countries (Russia, China, Britain, France, Germany and the United States, with the active participation of the EU) adopted the JCPOA as a way of resolving the Iranian nuclear problem, which had been a source of concern for the international community, above all the IAEA. This truly historic document brought Iran’s nuclear program in line with IAEA requirements and significantly reduced Tehran’s ability to build nuclear weapons.

Resolution 2231, unanimously approved by the UN Security Council on July 20, gave the JCPOA the status of international law.

The JCPOA and the UN Security Council resolution envisaged a reduction in Iran’s nuclear potential and a slowdown in its development rates within the next 10 to 15 years. It also provided for a gradual lifting of the financial and economic sanctions imposed on Iran over its nuclear program, thus setting in motion a process of peaceful and civilized implementation of the nuclear nonproliferation regime.

However, the new US President Donald Trump started lashing out against the JCPOA in 2016, while still on the campaign trail. As a result, in 2018 he withdrew the US from the compromise nuclear deal and slapped tough unilateral sanctions on the Islamic Republic.  What is more, “secondary” US sanctions targeted also foreign companies that would dare to keep doing business with Iran.

Iran, meanwhile, had given no reason whatsoever to doubt its meticulous implementation of the terms of the JCPOA accord. Since January 2016, the IAEA has verified Iran’s compliance with the JCPOA 13 times, with the UN nuclear watchdog’s Secretary General repeatedly confirming Tehran’s compliance with the agreement. Moreover, since the US withdrawal from the JCPOA, Iran has been intensifying its cooperation with the IAEA in a clear bid not to give Washington any pretext to blame it all down on Tehran, which has allowed no technical violations of the JCPOA and has consistently implemented its provisions.

All the signatories to the 2015 nuclear accord with Iran, including the European Union (and excluding the US), protested Washington’s decision to exit the JCPOA and have been working hard to keep it in place, even without the US.

As part of this effort, Iran was persuaded to continue to abide by the terms of the nuclear pact, even despite US sanctions, as it wants to avoid confrontation and maintain normal economic relations with the EU and other countries, and is not yet ready to exit the 2015 nuclear accord.

In August 2018, the EU reactivated the “blocking statute” that prohibits European companies from complying with US sanctions on Iran and implementing any decisions by foreign courts based on these sanctions thus nullifying their effect. The “blocking statute” also allows all European organizations to take legal action to recover damages arising from US extraterritorial sanctions from the persons who caused these damages to happen (meaning the US government).

This measure has proved less effective than expected though, since state authorities in countries with market economies cannot force private companies to challenge the global supremacy of the US dollar or dictate conditions in the global market, including the financial one, dominated by the United States. Therefore, it became clear that the situation necessitated the creation of a special mechanism for doing business with Iran bypassing  “primary” and “secondary” US sanctions with the help of an alternative payment channel to facilitate trade with Tehran – essentially a separate European SWIFT system with payments made in euros.

Much will depend on the effectiveness of this mechanism, to be shortly registered in France, and which is at the core of the EU’s efforts to keep the JCPOA in place. This means that the anti-American body will very likely be headquartered in France and headed by a German citizen with France, Germany and Britain acting as shareholders.

Even though the Special Purpose Vehicle (SPV), which offers sophisticated compensation services for exports to and imports from Iran, has not been devised with humanitarian activities in mind, EU officials still expect it to initially be used for food and medicine supplies until the system is firmly in place and working smoothly.

Meanwhile, Tehran believes that the SPV should go beyond covering only drugs and food, and also include a wide range of transactions, as well as economic and industrial cooperation, and even investments. Future will show whether this can be done though. According to some experts, the SPV is just a sort of a barter option without attracting direct cash payments, and will only serve small-scale transactions. French Foreign Minister Le Drian believes, however, that within the framework of the SPV Iran will be able to “benefit from some of its oil sources and at the same time buy essential products from the three main [European] partners,” (namely France, Germany and Britain).

The key question is how the US will respond. Will it be able to sidetrack this mechanism too?

Experts say, meanwhile, that the SPV is certainly not a magic wand but rather a complex, multi-layered financial and economic system. Moreover, its completely transparent market mechanism of maintaining business ties with Iran makes it vulnerable to potential attacks by Washington.

One encouraging factor here is that Switzerland, which is not an EU member, strongly believes that the JCPOA should remain in place and is now establishing its own interbank financial channel (independent of the EU) that would make it possible to bypass the SWIFT system in settlements with Iran and circumvent the US sanctions against Tehran.

Sharif Nezam-Mafi, Chairman of the Board of the Iran-Switzerland Chamber of Commerce, said that financial exchanges between the two countries will be carried out by the Swiss bank BSP, which prior to the introduction of anti-Iranian sanctions executed currency transfers from Iran to Switzerland.

Moreover, some of the proceeds from Iranian oil sales will be kept in this Swiss bank.

The launch of the SPV ushers in possibly the most crucial period in the ongoing political tug-of-war for preserving the JCPOA accord. If successful, it could help ease tensions in and around Iran and create a precedent in the future attempts to challenge the US financial domination and its aggressive policy of using economic sanctions against other countries.

If not, this could lead to Iran’s withdrawal from the JCPOA and the resumption of its nuclear program which, in turn, would further ratchet up tensions around the Islamic Republic.

Let us hope that the latter scenario never comes true.

First published in our partner International Affairs

Senior research assistant at RAS Institute of Oriental Studies, candidate of historical sciences

Continue Reading
Comments

Europe

Iceland’s Historic(al) Elections

Published

on

The morning of September, 26 was a good one for Lenya Run Karim of the Pirate Party. Once the preliminary results were announced, things were clear: the 21-year-old law student of the University of Iceland, originating from a Kurdish immigrant family, had become the youngest MP in the country’s history.

In historical significance, however, this event was second to another. Iceland, the world champion in terms of gender equality, became the first country in Europe to have more women MPs than men, 33 versus 30. The news immediately made world headlines: only five countries in the world have achieved such impressive results. Remarkably, all are non-European: Rwanda, Nicaragua and Cuba have a majority of women in parliament, while Mexico and the UAE have an equal number of male and female MPs.

Nine hours later, news agencies around the world had to edit their headlines. The recount in the Northwest constituency affected the outcome across the country to delay the ‘triumph for women’ for another four years.

Small numbers, big changes

The Icelandic electoral system is designed so that 54 out of the 63 seats in the Althingi, the national parliament, are primary or constituency seats, while another nine are equalization seats. Only parties passing the 5 per cent threshold are allowed to distribute equalisation seats that go to the candidates who failed to win constituency mandates and received the most votes in their constituency. However, the number of equalisation mandates in each of the 6 constituencies is legislated. In theory, this could lead to a situation in which the leading party candidate in one constituency may simply lack an equalisation mandate, so the leading candidate of the same party—but in another constituency—receives it.

This is what happened this year. Because of a difference of only ten votes between the Reform Party and the Pirate Party, both vying for the only equalisation mandate in the Northwest, the constituency’s electoral commission announced a recount on its own initiative. There were also questions concerning the counting procedure as such: the ballots were not sealed but simply locked in a Borgarnes hotel room. The updated results hardly affected the distribution of seats between the parties, bringing in five new MPs, none of whom were women, with the 21-year-old Lenya Run Karim replaced by her 52-year-old party colleague.

In the afternoon of September, 27, at the request of the Left-Green Movement, supported by the Independence Party, the Pirates and the Reform Party, the commission in the South announced a recount of their own—the difference between the Left-Greens and the Centrists was only seven votes. There was no ‘domino effect’, as in the case of the Northwest, as the five-hour recount showed the same result. Recounts in other districts are unlikely, nor is it likely that Althingi—vested with the power to declare the elections valid—would invalidate the results in the Northwest. Nevertheless, the ‘replaced’ candidates have already announced their intention to appeal against the results, citing violations of ballot storage procedures. Under the Icelandic law, this is quite enough to invalidate the results and call a re-election in the Northwest, as the Supreme Court of Iceland invalidated the Constitutional Council elections due to a breach of procedure 10 years ago. Be that as it may, the current score remains 33:30, in favor of men.

Progressives’ progress and threshold for socialists

On the whole, there were no surprises: the provisional allocation of mandates resembles, if with minor changes, the opinion polls on the eve of the election.

The ruling three-party coalition has rejuvenated its position, winning 37 out of the 63 Althingi seats. The centrist Progressive Party saw a real electoral triumph, improving its 2017 result by five seats. Prime-minister Katrín Jakobsdóttir’s Left-Green Movement, albeit with a slight loss, won eight seats, surpassing all pre-election expectations. Although the centre-right Independence Party outperformed everyone again to win almost a quarter of all votes, 16 seats are one of the worst results of the Icelandic ‘Grand Old Party’ ever.

The results of the Social-Democrats, almost 10% versus 12.1% in 2017, and of the Pirates, 8.6% versus 9.2%, have deteriorated. Support for the Centre Party of Sigmundur Gunnlaugsson, former prime-minister and victim of the Panama Papers, has halved from 10.9% to 5.4%. The centrists have seen a steady decline in recent years, largely due to a sexist scandal involving party MPs. The populist People’s Party and the pro-European Reform Party have seen gains of 8.8% and 8.3%, as compared to 6.9% and 6.7% in the previous elections.

Of the leading Icelandic parties, only the Socialist Party failed to pass the 5 per cent threshold: despite a rating above 7% in August, the Socialists received only 4.1% of the vote.

Coronavirus, climate & economy

Healthcare and the fight against COVID-19 was, expectedly, on top of the agenda of the elections: 72% of voters ranked it as the defining issue, according to a Fréttablaðið poll. Thanks to swift and stringent measures, the Icelandic government brought the coronavirus under control from day one, and the country has enjoyed one of the lowest infection rates in the world for most of the time. At the same time, the pandemic exposed a number of problems in the national healthcare system: staff shortages, low salaries and long waiting lists for emergency surgery.

Climate change, which Icelanders are already experiencing, was an equally important topic. This summer, the temperature has not dropped below 20°C for 59 days, an anomaly for a North-Atlantic island. However, Icelanders’ concerns never converted into increased support for the four left-leaning parties advocating greater reductions in CO2 emission than the country has committed to under the Paris Agreement: their combined result fell by 0.5%.

The economy and employment were also among the main issues in this election. The pandemic has severely damaged the island nation’s economy, which is heavily tourism-reliant—perhaps, unsurprisingly, many Icelanders are in favor of reviving the tourism sector as well as diversifying the economy further.

The EU membership, by far a ‘traditional’ issue in Icelandic politics, is unlikely to be featured on the agenda of the newly-elected parliament as the combined result of the Eurosceptics, despite a loss of 4%, still exceeds half of the overall votes. The new Althingi will probably face the issue of constitutional reform once again, which is only becoming more topical in the light of the pandemic and the equalization mandates story.

New (old) government?

The parties are to negotiate coalition formation. The most likely scenario now is that the ruling coalition of the Independence Party, the Left-Greens and the Progressives continues. It has been the most ideologically diverse and the first three-party coalition in Iceland’s history to last a full term. A successful fight against the pandemic has only strengthened its positions and helped it secure additional votes. Independence Party leader and finance minister Bjarni Benediktsson has earlier said he would be prepared to keep the ruling coalition if it holds the majority. President Guðni Jóhannesson announced immediately after the elections that he would confirm the mandate of the ruling coalition to form a new government if the three parties could strike a deal.

Other developments are possible but unlikely. Should the Left-Greens decide to leave the coalition, they could be replaced by the Reform Party or the People’s Party, while any coalition without the Independence Party can only be a four-party or larger coalition.

Who will become the new prime-minister still remains to be seen—but if the ruling coalition remains in place, the current prime-minister and leader of the Left-Greens, Katrín Jakobsdóttir, stands a good chance of keeping her post: she is still the most popular politician in Iceland with a 40 per cent approval rate.

The 2021 Althingi election, with one of the lowest turnouts in history at 80.1%, has not produced a clear winner. The election results reflect a Europe-wide trend in which traditional “major” parties are losing support. The electorate is fragmenting and their votes are pulled by smaller new parties. The coronavirus pandemic has only reinforced this trend.

The 2021 campaign did not foreshadow a sensation. Although Iceland has not become the first European country with a women’s majority in parliament, these elections will certainly go down in history as a test of Icelanders’ trust to their own democracy.

From our partner RIAC

Continue Reading

Europe

EU-Balkan Summit: No Set Timeframe for Western Balkans Accession

Published

on

From left to right: Janez JANŠA (Prime Minister, Slovenia), Charles MICHEL (President of the European Council), Ursula VON DER LEYEN (President of the European Commission) Copyright: European Union

On October 6, Slovenia hosted a summit between the EU and the Western Balkans states. The EU-27 met with their counterparts (Albania, Bosnia-Herzegovina, Serbia, Montenegro, North Macedonia and Kosovo) in the sumptuous Renaissance setting of Brdo Castle, 30 kilometers north of the capital, Ljubljana. Despite calls from a minority of heads of state and government, there were no sign of a breakthrough on the sensitive issue of enlargement. The accession of these countries to the European Union is still not unanimous among the 27 EU member states.

During her final tour of the Balkans three weeks ago, German Chancellor Angela Merkel stated that the peninsula’s integration was of “geostrategic” importance. On the eve of the summit, Austrian Chancellor Sebastian Kurz backed Slovenia’s goal of integrating this zone’s countries into the EU by 2030.

However, the unanimity required to begin the hard negotiations is still a long way off, even for the most advanced countries in the accession process, Albania and North Macedonia. Bulgaria, which is already a member of the EU, is opposing North Macedonia’s admission due to linguistic and cultural differences. Since Yugoslavia’s demise, Sofia has rejected the concept of Macedonian language, insisting that it is a Bulgarian dialect, and has condemned the artificial construction of a distinct national identity.

Other countries’ reluctance to join quickly is of a different nature. France and the Netherlands believe that previous enlargements (Bulgaria and Romania in 2007) have resulted in changes that must first be digested before the next round of enlargement. The EU-27 also demand that all necessary prior guarantees be provided regarding the independence of the judiciary and the fight against corruption in these countries. Despite the fact that press freedom is a requirement for membership, the NGO Reporters Without Borders (RSF) urged the EU to make “support for investigative and professional journalism” a key issue at the summit.”

While the EU-27 have not met since June, the topic of Western Balkans integration is competing with other top priorities in the run-up to France’s presidency of the EU in the first half of 2022. On the eve of the summit, a working dinner will be held, the President of the European Council, Charles Michel, called for “a strategic discussion on the role of the Union on the international scene” in his letter of invitation to the EU-Balkans Summit, citing “recent developments in Afghanistan,” the announcement of the AUKUS pact between the United States, Australia, and the United Kingdom, which has enraged Paris.

The Western Balkans remain the focal point of an international game of influence in which the Europeans seek to maintain their dominance. As a result, the importance of reaffirming a “European perspective” at the summit was not an overstatement. Faced with the more frequent incursion of China, Russia, and Turkey in that European region, the EU has pledged a 30 billion euro Economic and Investment Plan for 2021-2027, as well as increased cooperation, particularly to deal with the aftermath of the Covid-19 pandemic.

Opening the borders, however, is out of the question. In the absence of progress on this issue, Albania, North Macedonia, and Serbia have decided to establish their own zone of free movement (The Balkans are Open”) beginning January 1, 2023. “We are starting today to do in the region what we will do tomorrow in the EU,” said Albanian Prime Minister Edi Rama when the agreement was signed last July.

This initiative, launched in 2019 under the name “Mini-Schengen” and based on a 1990s idea, does not have the support of the entire peninsular region, which remains deeply divided over this project. While Bosnia and Herzegovina and Montenegro are not refusing to be a part of it and are open to discussions, the Prime Minister of Kosovo, Albin Kurti, who took office in 2020, for his part accuses Serbia of relying on this project to recreate “a fourth Yugoslavia”

Tensions between Balkan countries continue to be an impediment to European integration. The issue of movement between Kosovo and Serbia has been a source of concern since the end of September. Two weeks of escalation followed Kosovo’s decision to prohibit cars with Serbian license plates from entering its territory, in response to Serbia’s long-standing prohibition on allowing vehicles to pass in the opposite direction.

In response to the mobilization of Kosovar police to block the road, Serbs in Kosovo blocked roads to their towns and villages, and Serbia deployed tanks and the air force near the border. On Sunday, October 3, the conflict seemed to be over, and the roads were reopened. However, the tone had been set three days before the EU-Balkans summit.

Continue Reading

Europe

German Election: Ramifications for the US Foreign Policy

Published

on

Image source: twitter @OlafScholz

In the recent German election, foreign policy was scarcely an issue. But Germany is an important element in the US foreign policy. There is a number of cases where Germany and the US can cooperate, but all of these dynamics are going to change very soon.

The Germans’ strategic culture makes it hard to be aligned perfectly with the US and disagreements can easily damage the relations. After the tension between the two countries over the Iraq war, in 2003, Henry Kissinger said that he could not imagine the relations between Germany and the US could be aggravated so quickly, so easily, which might end up being the “permanent temptation of German politics”. For a long time, the US used to provide security for Germany during the Cold War and beyond, so, several generations are used to take peace for granted. But recently, there is a growing demand on them to carry more burden, not just for their own security, but for international peace and stability. This demand was not well-received in Berlin.

Then, the environment around Germany changed and new threats loomed up in front of them. The great powers’ competition became the main theme in international relations. Still, Germany was not and is not ready for shouldering more responsibility. Politicians know this very well. Ursula von der Leyen, who was German defense minister, asked terms like “nuclear weapons” and “deterrence” be removed from her speeches.

Although on paper, all major parties appreciate the importance of Germany’s relations with the US, the Greens and SPD ask for a reset in the relations. The Greens insist on the European way in transatlantic relations and SPD seeks more multilateralism. Therefore, alignment may be harder to maintain in the future. However, If the tensions between the US and China heat up to melting degrees, then external pressure can overrule the internal pressure and Germany may accede to its transatlantic partners, just like when Helmut Schmid let NATO install medium-range nuclear missiles in Europe after the Soviet Union attacked Afghanistan and the Cold War heated up.

According to the election results, now three coalitions are possible: grand coalition with CDU/CSU and SPD, traffic lights coalition with SPD, FDP, and Greens, Jamaica coalition with CDU/CSU, FDP, and Greens. Jamaica coalition will more likely form the most favorable government for the US because it has both CDU and FDP, and traffic lights will be the least favorite as it has SPD. The grand coalition can maintain the status quo at best, because contrary to the current government, SPD will dominate CDU.

To understand nuances, we need to go over security issues to see how these coalitions will react to them. As far as Russia is concerned, none of them will recognize the annexation of Crimea and they all support related sanctions. However, if tensions heat up, any coalition government with SPD will be less likely assertive. On the other hand, as the Greens stress the importance of European values like democracy and human rights, they tend to be more assertive if the US formulates its foreign policy by these common values and describe US-China rivalry as a clash between democracy and authoritarianism. Moreover, the Greens disapprove of the Nordstream project, of course not for its geopolitics. FDP has also sided against it for a different reason. So, the US must follow closely the negotiations which have already started between anti-Russian smaller parties versus major parties.

For relations with China, pro-business FDP is less assertive. They are seeking for developing EU-China relations and deepening economic ties and civil society relations. While CDU/CSU and Greens see China as a competitor, partner, and systemic rival, SPD and FDP have still hopes that they can bring change through the exchange. Thus, the US might have bigger problems with the traffic lights coalition than the Jamaica coalition in this regard.

As for NATO and its 2 percent of GDP, the division is wider. CDU/CSU and FDP are the only parties who support it. So, in the next government, it might be harder to persuade them to pay more. Finally, for nuclear participation, the situation is the same. CDU/CSU is the only party that argues for it. This makes it an alarming situation because the next government has to decide on replacing Germany’s tornados until 2024, otherwise Germany will drop out of the NATO nuclear participation.

The below table gives a brief review of these three coalitions. 1 indicates the lowest level of favoritism and 3 indicates the highest level of favoritism. As it shows, the most anti-Russia coalition is Jamaica, while the most anti-China coalition is Trafic light. Meanwhile, Grand Coalition is the most pro-NATO coalition. If the US adopts a more normative foreign policy against China and Russia, then the Greens and FDP will be more assertive in their anti-Russian and anti-Chinese policies and Germany will align more firmly with the US if traffic light or Jamaica coalition rise to power.

Issues CoalitionsTrafic LightGrand CoalitionJamaica
Russia213 
China312 
NATO132 

1 indicates the lowest level of favoritism. 3 indicates the highest level of favoritism.

In conclusion, this election should not make Americans any happier. The US has already been frustrated with the current government led by Angela Merkel who gave Germany’s trade with China the first priority, and now that the left-wing will have more say in any imaginable coalition in the future, the Americans should become less pleased. But, still, there are hopes that Germany can be a partner for the US in great power competition if the US could articulate its foreign policy with common values, like democracy and human rights. More normative foreign policy can make a reliable partner out of Germany. Foreign policy rarely became a topic in this election, but observers should expect many ramifications for it.

Continue Reading

Publications

Latest

Africa Today2 hours ago

Madagascar: Severe drought could spur world’s first climate change famine

More than one million people in southern Madagascar are struggling to get enough to eat, due to what could become the first famine...

South Asia4 hours ago

Bangladesh violence exposes veneer of Indo-Bangladesh bonhomie

Protests in Chittagong, Comilla and elsewhere left 10 dead, besides loss of property. The protests were sparked over an allegation...

East Asia6 hours ago

Importance of peace in Afghanistan is vital for China

There are multiple passages from Afghanistan to China, like Wakhan Corridor that is 92 km long, stretching to Xinjiang in...

Africa8 hours ago

Muscle Alone Will Not Be Enough to Release Nigeria from a Perpetual Stage of Instability

Nigeria is facing a multitude of security challenges, including kidnappings, banditry and successionist movements. The government solution has been consistently...

Central Asia10 hours ago

Prevention and Encroachment of ISIS into Central Asia from Afghanistan

Central Asia is a region that seems the next possible target for (Islamic State of Iraq and Al-Sham) ISIS. There...

Economy12 hours ago

Sustainable Agriculture in Modern Society

Now everybody is seeing the world is changing fast in this 21st century and many industries and modern buildings are...

Terrorism Terrorism
Intelligence14 hours ago

Sino-Russian regional activities after Afghanistan

After the Taliban took control of Afghanistan last August, Russia warned against the threat from the extremist organisation of the...

Trending