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June 19, 2019

What the US-Iran standoff tells us about the EU

Iran’s repeated pronouncements that it is about to breach the uranium enrichment ceilings set out in the now-defunct nuclear agreement were clearly aimed at the EU. The Iranian regime wants to put pressure on the Europeans to protect Iran from US sanctions. Iran may overestimate not only what the EU is willing to do, but also its capacity to act even if it wanted to. As we reported yesterday, there is no way that the EU is going to be ready, politically and technically, to take an aggressive stance against the US. Instex, the special purpose vehicle set up Germany, France and the UK, to provide official sources of funding companies that do business with Iran, is essentially a press release. 

The main constraint of EU foreign policy is not so much lack of agreement between member states, but the lack of effective instruments to counter US sanctions. This is due to the northern states' persistent refusal to create a deep euro capital market with a single safe asset. That failure is central to understanding the EU’s political and economic vulnerability. It has simultaneously made the eurozone more crisis-prone, and rendered its foreign policy ineffective as financial sanctions have supplanted military action as the first weapon of choice in 21st century diplomacy. The ability to impose sanctions, and more importantly to withstand sanctions from others, is critically dependent on the weight of your currency and the depth of your capital market.

A fitting example of the EU’s foreign policy weakness was the recent visit to Tehran by Heiko Maas, Germany's foreign minister. we still recall his loud-mouthed assertions about the EU taking control of the Swift consortium. This time he went to Tehran to plead with the regime to adhere to the letter and spirit of the nuclear agreement. And he achieved not a thing.

It was worth recalling that the Iran deal was considered the be the single biggest success story of EU foreign policy. As Federica Mogherini leaves office, she is presiding over the collapse of one of the EU's very few notable achievements in her area - of which the bulk was negotiated by her predecessor. The other foreign policy success was the joint position the EU managed to maintain after Russia’s annexation of the Crimea. We see multiple challenges on that front as well. Opposition to Russian sanctions is building in Germany and Italy. And it will be interesting to see whether EU solidarity survives the increasingly certain advent of US sanctions against the members of the Nordstream 2 pipeline consortium, or tariffs on German cars. 

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June 19, 2019

Is Germany withholding information on right-wing extremism?

A story we have long treated as outside our reservation has been the rise of right-wing terrorism in Germany. The latest incident was the murder of a regional politician in Germany by a neo-Nazi, the first time that a politician was targeted. The previously most-cited case was that of a duo of neo-Nazis thugs who committed a series of murders against immigrants, but they were generally believed to have acted on their own with a single accomplice.

What raises our specific interest in the latest killing is the assertion that the attackers acted alone may have been wrong. Stefan Aust, a former editor of Spiegel and a terrorism expert, has an extraordinary background story in Die Welt which reads like the beginning of a spy novel. He writes that the German government has been complicit in covering up some of the evidence. Particularly disturbing about the right-wing terrorism are the links between the terrorists and security officials.

Aust cites the case of a mole who infiltrated a group, and who seemed to have converted to them. One of the moles and his handler at the security services had previous links with the politician who was murdered a couple of weeks ago. Aust's insinuation is that parts of the German security services have gone rogue. 

That information would be consistent with the decision by the government to block the publication of information related to the two Nazi terrorists who committed murders against immigrants. Aust writes that the security services shredded a lot of evidence in this case. A 230-page report into this case by the security service of the state of Hesse was classified as top secret for another 120 years. Merkel’s former secret-service coordinator told the Bundestag that there were state secrets at stake that would undermine the ability of the government to act. We do not recall similar incidents during the period of left-wing terrorism from the 1970s until 1990s. 

Aust also reports that the neo-Nazis have built up networks in the German army, and entertain relations with AfD MPs. We don’t know enough yet about the current case - except the name of the suspect and some of the background, which is not very illuminating. Aust writes that terrorists do not act as lone wolves even if they appear to. They are always embedded in some form of organisation. 

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