We use cookies to help improve and maintain our site. More information.
close

July 19, 2019

Instex shows the EU is caught between the US and Russia

Instex, the special-purpose vehicle set up by France, Germany and the UK to sustain trade with Iran, was never intended to circumvent US sanctions but to sustain legitimate trade in non-sanctioned goods. The problem Instex was designed to address was one of overly compliant non-US banks. But the actual problem faced by trade with Iran is that the companies doing the importing and exporting are themselves afraid of being hit by US sanctions, and even less prepared to deal with them than banks which after all already have compliance departments. It is in this context, very well described by a recent LA Times backgrounder, that one needs to read the latest developments surrounding Instex.

Russia reiterated its interest in participating in Instex to clear trade with Iran. But as the FT reported this, it prompted a warning by Steven Mnuchin, US Treasury secretary, that breaching US sanctions would lead to exclusion from the dollar system. Mnuchin's warning is a shot across the bow of anyone attempting to bring Iranian oil trade within Instex' scope. Iran, of course, has been saying that without oil Instex is irrelevant. And Russia has indicated that they would work to facilitate Iran oil exports despite US sanctions. But the FT does not give any direct quotes of Russian officials saying Instex should clear oil transactions.

What Mnuchin is insinuating is the possibility that Instex itself might become a target of US sanctions if it clears oil-related transactions. The LA Times story cites two former US officials involved with Iran sanctions who make the point that previous administrations would work with firms to make non-sanctioned trade practically possible. But the current administration has adopted a policy of making life as hard for Instex as possible. We reported earlier on the idea that the US government actually hoped Instex would work to keep Iran within the nuclear deal as the US sanctions forced it into a renegotiation. But according to the LA Times' sources that faction of the US administration has lost the argument. 

Leaving aside the geopolitical impact of increased tensions around the Persian Gulf, what should concern the EU is not the economic impact of impaired trade with Iran. The inability of Instex to make a dent in the secondary sanctions should be a concern in the hypothetical case when the US imposes secondary sanctions on much more strategic trading partners of the EU, say for instance Russia. After all, the US Senate just passed a resolution condemning both Russian aggression in Ukraine, and the construction of the Nord Stream 2 gas pipeline, as threats to European security. Watch this space.

Show Comments Write a Comment

July 19, 2019

Johnson’s two Brexit options

Perhaps the most telling of all Brexit news stories is this one according to which Remainers want to force the Queen to attend the next European Council in person in order to ask for a Brexit delay. Desperate times are calling for desperate measures. It is not going to happen, of course, but it is the thought that counts.

Yesterday the House of Commons passed another legally meaningless vote against a no-deal Brexit. We think the vote is useful in one respect only: it reminds us - if such a reminder were needed - of the reality of a government without a parliamentary majority. When Boris Johnson walks into Number 10 Downing Street next week, he will not have a stable parliamentary majority behind him. He does not need a majority to trigger a no-deal Brexit. That happens automatically. But he needs a majority to manage it.  

The situation leaves him with two choices. The first is early elections in which he campaigns on a Brexit-delivery theme - pitched against a second-referendum promise by Labour. 

The second is for him to seek an alternative deal - which can mean a longer transition period as a de facto alternative to the backstop, or a Northern-Ireland-only backstop. 

We are not sure the latter will work with the die-hard eurosceptics. This is why the probability of no-deal Brexit remains high. It was always thus. Then again, politics is the pursuit of shifting events and expectations.

Show Comments Write a Comment

This is the public section of the Eurointelligence Professional Briefing, which focuses on the geopolitical aspects of our news coverage. It appears daily at 2pm CET. The full briefing, which appears at 9am CET, is only available to subscribers. Please click here for a free trial, and here for the Eurointelligence home page.

 

Recent News

  • September 23, 2019
  • Corbyn’s last big battle
  • Germany’s CO2 compromise meets all targets - except the climate targets
  • November 13, 2018
  • Peak Salvini?
  • Protest uberisation
  • January 05, 2018
  • Catalonia's government by Skype
  • The case for EEA membership
  • February 28, 2017
  • Is Hamon losing the right wing of his party?
  • Something we just don’t understand
  • Solve the problem
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • March 11, 2020
  • While Italy is in lockdown, Germany allows football matches
  • Ireland grand coalition
  • May 31, 2019
  • Salvini’s frightening strength
  • The significance of Corbyn’s latest flipflop on the referendum
  • August 20, 2018
  • ... and a subtle shift in EU policies towards both Russia and Turkey
  • Nothing to celebrate about the end of the bailout programme
  • Support for Brexit holding up
  • November 09, 2017
  • From street protests to road closures
  • What Russia wants
  • January 31, 2017
  • Project fear against Italexit
  • On how not to frustrate Brexit
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • October 17, 2019
  • A dangerous game for the EU
  • After Brexit, get ready for a German EU budget rebate
  • February 04, 2019
  • Watch out for the resurgence in Tory unity
  • The gilets-jaunes' effect on the European elections
  • What did he possibly mean by that?
  • May 25, 2018
  • Rejected by US, Germany is turning towards China...
  • ...and France is turning to Russia
  • UK ties Galileo to security partnership
  • Germans are discovering miniBoTs
  • September 14, 2017
  • Bravo Mr Juncker
  • ... what he said about the labour market
  • ... and what his speech means for Brexit
  • January 05, 2017
  • French Socialist primaries - old wine in new bottles
  • Le Pen's hard ecu
  • Will Tusk get a second mandate?
  • Themes of 2017
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • December 02, 2019
  • Will pension reform protests spiral out of control?
  • Malta's PM resigns over murder case
  • April 24, 2019
  • May's final and biggest gamble
  • Will the EP be Brexit's great parliamentary beneficiary?
  • Can Loiseau fight the far right given her past?
  • September 12, 2018
  • It is easy to criticise Chequers but very hard to come up with an alternative
  • February 05, 2018
  • How big is Germany's external surplus, really?
  • Macron's first election test
  • Coeure's endorsement of a fiscal union
  • July 03, 2017
  • Can Greece exit its programme without a credit line?
  • The softening Brexit
  • Macron's state of the nation address
  • November 28, 2016
  • And now what Monsieur Fillion?
  • The inescapable logic of an interim agreement
  • On Germany's foreign policy post-Trump
  • How to lose against the populists
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • March 16, 2020
  • Why many of the Covid-19 statistics are misleading
  • September 17, 2019
  • Beware of the diplomacy of humiliation
  • Germany’s climate hypocrisy
  • March 18, 2019
  • May's deal still on the table. Don't rule it out.
  • EPP decision on Fidesz still open
  • On the defeat of liberalism
  • September 21, 2018
  • SPD ministers want to continue grand coalition
  • March 28, 2018
  • The real reason for the sanctions against Russia
  • Wishful thinking: Brexit edition
  • Wishful thinking: Future of euro edition
  • Wishful thinking: Italy edition
  • October 02, 2017
  • Catalonia recalls EU and eurozone instability
  • French trade unions increase pressure over labour reforms
  • Watch out for a political accident in the UK
  • Municipal elections boost Portugal's Socialists
  • April 10, 2017
  • Nein, nein, nein, und nein
  • Sounds like a bad Brexit story, but ain’t
  • On how not to exit the euro
  • October 17, 2016
  • Ceta is dead for now
  • L’après-Hollande, c'est Hollande
  • SPD against Russia sanctions
  • Nissan to join customs union and other fanciful tales
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • January 24, 2020
  • Is Germany anti-semitic and racist?
  • Did the Greek financial crisis play a role in Brexit?
  • September 18, 2019
  • No doubt, this is a constitutional crisis
  • Macron's immigration bid
  • May 13, 2019
  • Brexit Party has already changed UK politics
  • Orbán visits Trump, after a very long wait
  • Le Pen's appeal to the PiS likely to fall on deaf ears
  • January 04, 2019
  • Will the AfD become the Dexit party?
  • Romania's corruption problem in the spotlight of its EU presidency
  • August 28, 2018
  • Urban politics and national crisis - the Irish case
  • How anti-semitism became one of the main issues in British politics
  • April 25, 2018
  • Macron's pitch to Trump
  • Montoro in Schleswig-Holstein
  • The old world and the new
  • December 22, 2017
  • Will Macron be the new de Gaulle?
  • 2018 through the looking glass
  • August 21, 2017
  • Soft, getting softer
  • Tsipras' chances of a boost
  • On the fallacy of a middle-ground option for the eurozone
  • April 20, 2017
  • Don’t bet on Trump turning globalist
  • A note on UK election polls
  • December 20, 2016
  • The politics of terror
  • On Lagarde
  • Is a disruptive Brexit possible?
  • August 22, 2016
  • Gold for Brexit
  • EU and Turkey talking past each other
  • Switzerland is the next migrant transit country
  • On the death of neoliberal economics
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • May 07, 2020
  • Will Germany cease to host US nuclear weapons on its soil?
  • April 15, 2020
  • Italy’s coalition disagrees about the ESM
  • March 23, 2020
  • Orbán seeks to extend his powers
  • UK as the double counterfactual
  • March 02, 2020
  • What the return of the refugee crisis tells us about the EU
  • Does the UK really want a deal? Does France?
  • February 12, 2020
  • Turkey's standoff with Russia over Idlib
  • Watch out for Renzi
  • January 24, 2020
  • Is Germany anti-semitic and racist?
  • Did the Greek financial crisis play a role in Brexit?
  • January 06, 2020
  • A decade that started with a bang
  • What to expect of Spain's next government
  • Divide et impera: Macron's pension reform strategy
  • December 18, 2019
  • Wirtschaftswunder kaputt
  • December 02, 2019
  • Will pension reform protests spiral out of control?
  • Malta's PM resigns over murder case
  • November 18, 2019
  • Is Macron facing another uprise against elites?
  • Forget the inflation target: Lagarde’s job is much bigger.
  • November 04, 2019
  • Brexit tactical voting is happening - on both sides
  • Merkel promises 1m charging stations - but doesn't tell us how
  • October 22, 2019
  • High stake poker with Turkey
  • Without EU accession prospect, what is at stake for Macedonia?
  • October 11, 2019
  • Referendum numbers are edging up - slowly
  • Goulard's foreboding rejection
  • Turkey advances in Syria and threatens Europe
  • September 30, 2019
  • A pyrrhic victory for Kurz
  • Will there really be UK elections?
  • September 19, 2019
  • Italy's 2020 budget will be a moment of truth
  • Austria's soft faced far-right
  • September 10, 2019
  • Beware of the Salvini trap
  • After the diesel car, now goes the SUV
  • September 02, 2019
  • Prorogation already served its purpose - events will come to a head this week
  • EU citizens in the UK are the biggest victims of no-deal Brexit
  • August 27, 2019
  • Remain’s narrowing pathway
  • Macron's diplomatic masterstroke
  • August 05, 2019
  • No deal first, elections later
  • Free movement of labour? Not for politicians
  • Europe already lost the digital battle
  • July 29, 2019
  • No-deal Brexit is no longer just a scenario
  • No German warships to the Strait of Hormuz
  • July 26, 2019
  • Could Johnson succeed?
  • Turkey's retaliation
  • July 23, 2019
  • When Europe lacks a strategy
  • LibDems are back, but British liberalism is not
  • July 22, 2019
  • Will Johnson go for elections?
  • How will von der Leyen handle the east?
  • July 19, 2019
  • Instex shows the EU is caught between the US and Russia
  • Johnson’s two Brexit options