he Iran nuclear deal had been on life support well before the COVID-19 outbreak turned into a global pandemic. After the United States pulled out of the Joint Comprehensive Plan of Action (JCPOA) in May of 2018, its European signatories—Germany, France, the United Kingdom, and the European Union (EU)—pledged to take a leading role in delivering sanctions relief to Iran. Regrettably, little of substance materialized. With the promised benefits of the JCPOA not forthcoming, Tehran gradually reduced its compliance with the agreement, leaving the deal close to collapse at the beginning of 2020. However, the Europeans may still be able to salvage the deal with the help of an unlikely ally: the coronavirus. As the EU is the most important exporter of medical goods in the world, the virus has provided the Union with the necessary leverage to preserve the JCPOA.
Could INSTEX Save the Deal?
After the U.S. pull-out, Germany, France, and the United Kingdom set up the Instrument in Support of Trade Exchanges (INSTEX) to facilitate trade with Iran. The original idea behind INSTEX was to create a Euro barter system. Since receiving or sending payments to trade with Iran could violate U.S. sanctions, INSTEX would instead match the Euro receipts of companies selling goods to Iran with the Euro payments of companies buying goods from Iran. This theoretically allows the system to circumvent, rather than break, U.S. sanctions. Yet, when confronted with the threat of U.S. extraterritorial sanctions, almost all European companies still chose to abandon trade with Iran. Additionally, INSTEX has been plagued by a variety of teething issues from its very inception and remains strictly limited to humanitarian purposes—such as agricultural commodities and food, but also medical goods. However, it is these medical goods that could now offer the JCPOA a new lease on life.
While Chinese facial masks have grabbed headlines, it is the EU that is Iran’s primary source of medical supplies. Case in point, in 2018, 70% of all pharmaceutical products exported to Iran came from the EU, as opposed to about 4% from China, with figures for the export of medical devices being in a similar range. This, combined with the fact that the COVID-19 infection curve in Europe is gradually flattening, now puts the EU in the unique situation of being able to throw Iran a medical lifeline. It was no coincidence that after months of delays on the Iranian side, the first INSTEX transaction, consisting of medical supplies, finally went through at the end of March.
Tehran’s Reassessment of “Humanitarian Trade”
Even though Tehran is likely significantly undercounting its fatalities, official government data still indicates that it has been the country hardest hit by COVID-19 in the Middle East. Like many other countries, the Iranian government bungled its initial response, but Tehran has considerably less margin for error than most, as it is already suffering from a debilitating economic recession due to the re-imposition of U.S. sanctions. Yet, as the Middle East is dealing with the virus, regional rivalries have increasingly been put on hold with the United Arab Emirates even delivering medical supplies to Iran. Unfortunately, neither Washington nor Tehran seems inclined to back away from their destructive escalatory spiral—if anything they are doubling down. Although U.S. sanctions technically allow for humanitarian trade, in reality they have severely hampered the export of medical supplies such as testing kits to Iran.
Consequently, INSTEX’s humanitarian focus, which has widely been decried as a weakness, could now turn out to be its saving grace. Since Iran is in desperate need of medical supplies, Tehran’s assessment on the value of “humanitarian trade” has changed quite dramatically. Conversely, the limited nature of the trade mechanism should hopefully assuage U.S. fears of INSTEX being used to prop up the regime. In an ideal world, this would be the perfect opportunity for a common transatlantic diplomatic offensive, as demanded by many prominent political voices and experts.
An Opportunity for De-escalation?
The U.S. government could take this as an opportunity for de-escalation, by pledging not to sanction any INSTEX transaction related to humanitarian trade for a period of three months. Moreover, Washington could reinstate a previously discarded escrow account system that would enable Iran to use its frozen foreign currency abroad to buy humanitarian goods. In return, Tehran could roll-back some of its violations of the nuclear deal and release some dual-national and foreign detainees currently residing in its prisons. Ideally, this would then provide the impetus for renewed talks on the basis of the JCPOA.
The obsession of the Trump administration with its maximum pressure strategy makes even such a transactional exchange unlikely. In fact, some in Washington appear to regard the coronavirus crisis as an opportunity to bring the U.S. maximum pressure strategy to full effect, either to force Tehran back to the negotiation table by finally shattering the JCPOA or to collapse the country altogether. Unfortunately, this approach overlooks the likelihood that weakening the Iranian regime might only succeed in making it more unpredictable and inclined to take risks abroad.
In the likely case that Washington balks, the Europeans must take the lead themselves. Above all, this means providing Iran with commercial access to medical supplies rather than leaving it dependent on aid shipments. If the prospect of a looming humanitarian disaster is not enough to spur them into action, then perhaps considering the implications of passivity to their health security will. Simply put, if any country in the EU’s extended neighborhood fails to stamp out the coronavirus, the disease will invariably be re-exported to Europe.
a global affairs media network
Could COVID-19 Cure the Iran Deal?
Photo by Mohammad Rezaie via Unsplash.
June 10, 2020
T
he Iran nuclear deal had been on life support well before the COVID-19 outbreak turned into a global pandemic. After the United States pulled out of the Joint Comprehensive Plan of Action (JCPOA) in May of 2018, its European signatories—Germany, France, the United Kingdom, and the European Union (EU)—pledged to take a leading role in delivering sanctions relief to Iran. Regrettably, little of substance materialized. With the promised benefits of the JCPOA not forthcoming, Tehran gradually reduced its compliance with the agreement, leaving the deal close to collapse at the beginning of 2020. However, the Europeans may still be able to salvage the deal with the help of an unlikely ally: the coronavirus. As the EU is the most important exporter of medical goods in the world, the virus has provided the Union with the necessary leverage to preserve the JCPOA.
Could INSTEX Save the Deal?
After the U.S. pull-out, Germany, France, and the United Kingdom set up the Instrument in Support of Trade Exchanges (INSTEX) to facilitate trade with Iran. The original idea behind INSTEX was to create a Euro barter system. Since receiving or sending payments to trade with Iran could violate U.S. sanctions, INSTEX would instead match the Euro receipts of companies selling goods to Iran with the Euro payments of companies buying goods from Iran. This theoretically allows the system to circumvent, rather than break, U.S. sanctions. Yet, when confronted with the threat of U.S. extraterritorial sanctions, almost all European companies still chose to abandon trade with Iran. Additionally, INSTEX has been plagued by a variety of teething issues from its very inception and remains strictly limited to humanitarian purposes—such as agricultural commodities and food, but also medical goods. However, it is these medical goods that could now offer the JCPOA a new lease on life.
While Chinese facial masks have grabbed headlines, it is the EU that is Iran’s primary source of medical supplies. Case in point, in 2018, 70% of all pharmaceutical products exported to Iran came from the EU, as opposed to about 4% from China, with figures for the export of medical devices being in a similar range. This, combined with the fact that the COVID-19 infection curve in Europe is gradually flattening, now puts the EU in the unique situation of being able to throw Iran a medical lifeline. It was no coincidence that after months of delays on the Iranian side, the first INSTEX transaction, consisting of medical supplies, finally went through at the end of March.
Tehran’s Reassessment of “Humanitarian Trade”
Even though Tehran is likely significantly undercounting its fatalities, official government data still indicates that it has been the country hardest hit by COVID-19 in the Middle East. Like many other countries, the Iranian government bungled its initial response, but Tehran has considerably less margin for error than most, as it is already suffering from a debilitating economic recession due to the re-imposition of U.S. sanctions. Yet, as the Middle East is dealing with the virus, regional rivalries have increasingly been put on hold with the United Arab Emirates even delivering medical supplies to Iran. Unfortunately, neither Washington nor Tehran seems inclined to back away from their destructive escalatory spiral—if anything they are doubling down. Although U.S. sanctions technically allow for humanitarian trade, in reality they have severely hampered the export of medical supplies such as testing kits to Iran.
Consequently, INSTEX’s humanitarian focus, which has widely been decried as a weakness, could now turn out to be its saving grace. Since Iran is in desperate need of medical supplies, Tehran’s assessment on the value of “humanitarian trade” has changed quite dramatically. Conversely, the limited nature of the trade mechanism should hopefully assuage U.S. fears of INSTEX being used to prop up the regime. In an ideal world, this would be the perfect opportunity for a common transatlantic diplomatic offensive, as demanded by many prominent political voices and experts.
An Opportunity for De-escalation?
The U.S. government could take this as an opportunity for de-escalation, by pledging not to sanction any INSTEX transaction related to humanitarian trade for a period of three months. Moreover, Washington could reinstate a previously discarded escrow account system that would enable Iran to use its frozen foreign currency abroad to buy humanitarian goods. In return, Tehran could roll-back some of its violations of the nuclear deal and release some dual-national and foreign detainees currently residing in its prisons. Ideally, this would then provide the impetus for renewed talks on the basis of the JCPOA.
The obsession of the Trump administration with its maximum pressure strategy makes even such a transactional exchange unlikely. In fact, some in Washington appear to regard the coronavirus crisis as an opportunity to bring the U.S. maximum pressure strategy to full effect, either to force Tehran back to the negotiation table by finally shattering the JCPOA or to collapse the country altogether. Unfortunately, this approach overlooks the likelihood that weakening the Iranian regime might only succeed in making it more unpredictable and inclined to take risks abroad.
In the likely case that Washington balks, the Europeans must take the lead themselves. Above all, this means providing Iran with commercial access to medical supplies rather than leaving it dependent on aid shipments. If the prospect of a looming humanitarian disaster is not enough to spur them into action, then perhaps considering the implications of passivity to their health security will. Simply put, if any country in the EU’s extended neighborhood fails to stamp out the coronavirus, the disease will invariably be re-exported to Europe.
