Why INSTEX Was Doomed from The Start: Iran’s Politics of Obstruction

Written by
Mehdi Oghbai

On March 9, a joint statement by the UK, France, and Germany (known as the E3) announced the dissolution of Instrument in Support of Trade Exchanges (INSTEX), citing the Iranian regime’s “continued obstruction.”

INSTEX was a payment mechanism created by the European Union in 2019 to facilitate trade with Iran while bypassing U.S. sanctions. Although the U.S. did not sanction medication and food, this Special-Purpose Vehicle was supposed to help Tehran to have access to basic humanitarian needs. Despite their smoke and mirrors campaign blaming sanctions for nearly all of Iran’s crises, the ruling fanatics were unhappy with the INSTEX, because they couldn’t use it to fund their oppressive and terrorist apparatus.

According to the E3’s statement on March 9, “For political reasons, Iran has systematically prevented INSTEX from fulfilling its mandate. Iran only agreed to a single transaction, in early 2020, for the export of medical goods from Europe to Iran.” The statement underlines that Tehran “consistently and deliberately blocked other proposals for transactions between the United Kingdom, Norway, the European Union and Iran.”

“This was born from a political determination to impede the use of INSTEX under any circumstance. Thus, the Iranian leadership has chosen to act against the interests of its people by refusing to cooperate on the export of medicine and other life-saving goods,” the statement adds, further clarifying that the ruling theocracy had other goals than “evading sanctions to help people.”

Why INSTEX failed?

In reaction to the INSTEX’s liquidation by the European countries, the Iranian regime’s Foreign Ministry Spokesperson, Naser Kanani, blamed the European powers for the SPV’s failure and said that Tehran didn’t need it. But despite the regime’s blame game and self-boasting rhetoric, the facts on the ground reveal the opposite. The Iranian regime started acting against INSTEX from its very first days. And there is precedence for this behavior.

In 2015, the clerical regime signed a nuclear deal with powers, formally known as the Joint Comprehensive Plan of Action (JCPOA). The deal provides the regime with major sanctions relief and economic incentives. But the regime did not use it to revive Iran’s bankrupt economy or address people’s dire needs. Crushed under sanctions, the world’s largest state sponsor of terrorism was seeking a way to fund its illicit activities.

Sadly, Western powers’ appeasement policy allowed the regime to give very little while receiving a lot. Besides, as regime officials later acknowledged, they never abided by the JCPOA terms and coerced and deceived the world community into giving it more incentive packages. When the U.S. withdrew from the JCPOA, citing the regime’s provocative actions, Tehran used the E.U.’s weak approach to further blackmail them.

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So, European powers initiated the INSTEX SPV, but that couldn’t help Tehran for various reasons. First, one of the main conditions for Iran to use this mechanism was accepting the conventions of the Financial Action Task Force (FATF), an international body that monitors money laundering and terrorism financing activities.

Iran’s name was suspended from the FATF blacklist following the JCPOA signing in 2015, with the condition that the regime would pass the necessary FATF convention to combat money laundering and terrorism financing.

But the efforts proved to be in vain. The ruling theocracy refrained from ratifying the money laundering and anti-terrorism conventions because the country’s economy is dominated by the terrorist Revolutionary Guards (IRGC). Some regime insiders considered ratifying FATF conventions as “self-sanctioning.”

Therefore, the FATF placed the regime on its blacklist, as Tehran refused to join the Palermo and Counter Financing Terrorism (CFT) conventions against funding terrorism and money laundering, which could have ended the mullahs’ support of their terrorist proxy groups such as Hezbollah.

A failed experiment

Even joining the FATF couldn’t help Iran’s ruling kleptocracy due to its institutionalized corruption. The only time Tehran used INSTEX to import medications is a testament to this fact. In 2020, as Iranians were grappling with the Covid-19 pandemic, due to the regime’s deliberate mismanagement of this crisis, roughly half a million lives perished.

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The failure of INSTEX once again underlined that engaging in a dialogue with Tehran and providing it with incentive packages neither boosts Iran’s economy nor persuades the regime to stop its malign activities. The clerical regime uses every penny to fund its terrorist apparatus. Iran’s Central Bank reported that Tehran generated approximately $180 billion in oil export revenue in just 2018 and 2019. However, it remains unclear where these earnings were spent.

The regime lacks legitimacy due to historical, political, religious, and social factors, with no popular base at home, and the recent nationwide uprising is a testament to this fact. So, Tehran requires a power source other than constituents and considers human rights violations, terrorism, and nuclear weapons as vital to its survival. It seeks sanctions relief without honoring any significant commitments. The mullahs will only retreat when facing a vexing choice for survival, not during deceptive negotiations.

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