THE EUROPEAN FINANCIAL MECHANISM “INSTEX” AND ITS IMPLICATIONS ON THE IRANIAN INTERIOR

04 Feb
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It poses a threat to Iran’s national security, another European trick, a Western tool to infiltrate Iran and restrict the activities of Iran’s vital institutions, another way to create divisions and inflame local public opinion and many other accusations by the so-called “the worried” or “the frightened” inside Iran about the European financial mechanism, INSTEX, which the European Union announced for transactions between the European countries and Iran.

While there are still many differences between the two wings of the Iranian politics in terms of Iran’s accession to the FATF, CFT, SPV and Palermo treaties, European countries announced the formation of financial mechanism for trade with Iran (INSTEX) in order to facilitate trade between European countries and Iran. This has added more fuel to the fire of differences between Rouhani’s government and the reformists on the one hand, and the hardline movement and the leaders of the Revolutionary Guard and the radical clerics on the other. While the government and reformists insist on taking advantage of the special financial mechanism announced by Europe and strongly calling for Iran’s ratification of the FATF, CFT and Palermo treaties, and that this is necessary to face US sanctions and to achieve some financial and trade openness with the international community, the hardline opposition and its supporters strongly oppose it. This opposition mainly increased especially after the European countries announced the start of this mechanism for trade with Iran.

Perhaps the most prominent effect of announcing the special financial mechanism by the European countries on the Iranian interior is the increase of internal divisions and differences. This was evident in the statements made by the symbols of both political sides and on their media outlets. The government supports these measures and agreements and believes that they are necessary to face the US sanctions and address some of the internal crises and problems that plague the country. This what prompted Rouhani to stress in his latest remarks that Iran is going through the most difficult economic conditions in forty years and that the country’s economy is going through an awkward situation. Rouhani wanted from this to send a message to the hardliners of the necessity not to reject Iran’s accession to the former treaties, otherwise the country’s economy would collapse.

In contrast, the hardline movement, the Revolutionary Guard and many political and military symbols reject Iran’s accession to these treaties, especially after the European Union has linked its execution with Iran’s final approval of ratifying the accession to the FATF, CFT and Palermo treaties. This has increased the fear of some and made them see that INSTEX would help imposing the US sanctions on Iran not the opposite and will turn into a disaster for Iran’s national security in the coming years. It will also restrict the activities of the most important Iranian institutions, mainly the Revolutionary Guard, and will limit its independence and freedom of activities, which achieves the US goals but in another way.

The hardliners and their supporters believe that there are a series of agreements reached between Rouhani’s government and the European Union before the announcement of this special mechanism, and perhaps one of these agreements has extracted Rouhani’s approval to accept concessions over the Iranian missile program and other regional issues in exchange of INSTEX. This means that the main issue is to force Iran to resort to the negotiating table on its missile program and regional policies, and linking the financial channel and other Western facilities to Iran with Iran’s missile program and Tehran’s plans and regional policies, which can be seen as a surrender by Rouhani’s government that directly harm the Iranian national security and goes beyond the red lines drawn by the Iranian supreme leader and protected by the Revolutionary Guard.

In fact, European countries and through this mechanism will dominate Iranian foreign trade, and a large part of the Iranian economy will be under its mercy. The funds to be collected by this mechanism will only be spent on Iran’s legitimate trade, i.e. food, medicine and medical equipment, and Iran will also be compelled to bring the revenue from selling oil to non-European buyers through INSTEX, which means that the Iranian funds will be managed by the Europeans completely and Tehran can only spend money on transactions allowed by the European countries, which is what the United States wants, that is, denying Iran the right to use its money, and that such funds should not be allowed to be used in the way Iran wants.

This means that the European mechanism will disrupt a large part of Iran’s foreign trade and will monitor Iran’s activities and dealings with the international community, which is rejected by the Revolutionary Guard and the hardliners. For them, this provides much of the services to the United States and limits the financial and business activities of the Revolutionary Guard.

The European Transaction Channel (SPV) has gone down several steps to become “INSTEX SAS” which reveals a new disappointment with European countries and their compatibility with US policies and deceiving Iran, especially since Europe has kept the issue of buying Iranian oil under sanctions and Tehran will have no right to access to hard currency from selling oil to countries such as: India, Japan and South Korea, but will transfer the hard currency obtained from the sale of Iranian oil to the European banks, which will bring great benefits to European banks. In return, Iran can buy goods from European countries, which is also in the interest of Europe and not to Iran, because it will make the European countries dominate the Iranian export market, and the latter will not be able to buy what it wants as SPV laws and INSTEX SAS never allow that and Iran will only be able to get goods and medicines from European countries from hard currency it has obtained from selling oil. Therefore, Iran will have to disrupt all factories and food and drug production centers that play a prominent role in the country’s economy and job creation, which poses another threat to Iran.

Thus, Iran will have to gradually cut its economic relations with other countries to be able to benefit from oil export funds, which means that Iran will face challenges in its economic relations and commitments with many countries, especially its allies such as Russia, China, Korea and others.

To activate INSTEX, Iran must approve FATF, CFT and Palermo, which means halting financial support for terrorism and money laundering. This means cutting off the lifelines for the Quds Force, the Revolutionary Guard, the Ministry of Intelligence and the Ministry of Defense and preventing transferring funds from these institutions to Iranian agents in the region, especially Hezbollah.

According to the above, INSTEX has achieved five gains for Europe. As for Iran, it has only achieved acquiescence, humiliation and linking its future with dark obscurity, in exchange of escaping an inevitable economic collapse if it refuses to deal with Europe and buying some time in a bid to find ways and other methods that reduce the economic burdens.

Al Mezmaah Studies & Research Centre

February 4 , 2019