‘Not Enough’: While You Were Focused On Osaka, The More Important Meeting Was In Vienna

Although the eyes of the world are on Osaka, where leaders gathered for photo ops, dinners, pointed discussions and perfunctory pleasantries (depending on the bilateral), a potentially more important meeting took place in Vienna on Friday.

It was there that officials from Europe met with Iranian representatives in a last ditch effort to convince Tehran to hold off on violating key elements of the 2015 nuclear deal. On June 17, a spokesman for the country’s atomic energy agency said Iran will exceed a threshold on uranium enrichment meant to ensure Tehran doesn’t possess weapons-grade material “within days”.

The provocative announcement was designed to force Europe to take action to alleviate the economic burden of US sanctions and, more generally, talk some sense into the Trump administration before things spin any further out of control.

Days after Iran’s warning, the IRGC shot down a US drone. That evening, Donald Trump was minutes away from allowing the US military to strike targets inside Iran. He called off the attacks, later telling the press that the death of 150 Iranians wasn’t “proportionate” to the downing of an unmanned drone.

That wasn’t the end of it, of course. The US went on to impose sanctions on Khamenei, prompting an incredulous response from Tehran, which in turn elicited a threat of “obliteration” from Trump.

Europe is understandably in a panic. To be clear, Britain, Germany and France (plus Russia and China), have taken steps to preserve the accord, including the bold maneuver to set up a special purpose vehicle to facilitate trade with Iran. But operating the scheme risks the ire of the US Treasury and could potentially deep-six trade talks with Trump. Late last month, Treasury’s undersecretary for terrorism and financial intelligence warned Instex (as the vehicle is called) that the SPV is exposed to US sanctions. As we’ve seen with Huawei and Hikvision, the Trump administration doesn’t differentiate between trade negotiations and other concerns (e.g., national security), which means it’s entirely possible that trade talks with Europe will get bogged down over NATO disputes and arguments about Brussels’ non-compliance with Iran sanctions.

On Friday, the EU said Instex is up and running. “France, Germany and the United Kingdom informed participants that Instex had been made operational and available to all EU Member States and that the first transactions are being processed”, a statement reads.

Iran’s top nuclear negotiator, Abbas Araqchi, said Friday that he has, in fact, been informed that the SPV is operational, but noted that it will only be effective to the extent it helps Iran sell crude. As of now, it’s not clear that’s possible logistically, and even if it was, the Trump administration would be incensed. Nonetheless, crude moved sharply (and suddenly) lower when the Instex headline crossed on Friday afternoon.

Ultimately, Iran came away from the Vienna talks unsatisfied. Araqchi called the discussions “a step forward”, but “not enough”.

“The decision to reduce our commitments [under the nuclear accord] has already been made and we will continue unless our expectations are met”, he said. “I don’t think the progress made today will be enough to stop our process but the decision will made in Tehran”.

UN inspectors said Iran hadn’t breached limits defined under the deal as of Thursday, but probably would over the weekend.

Meanwhile, the Wall Street Journal reported that US officials now say the May drone attacks on Saudi oil pipelines did not originate from Yemen, but rather from Iraq. Although the Houthis initially took credit, the US now claims that it was likely the work of Iranian militias in Southern Iraq or, more to the point, it was the work of proxy armies operating at the behest of Quds commander Qasem Soleimani.

As the Journal notes, this raises “concerns that Iran’s allies in the region are trying to open a new front in the conflict between Tehran and Washington”. Mike Pompeo has asked the Iraqi government to “take steps to ensure that Iraq isn’t used as a new staging ground for attacks”.

For their part, Iraqi leaders are skeptical of the US assessment and have asked Trump for more evidence. As usual, the administration finds itself in the ridiculous position of having to prove something which, were it not for Trump’s penchant for lying and Bolton’s notoriously hawkish stance on Iran, would hardly need proving. Such is life when your calling card is dishonestly, bad faith negotiating and strong-arm tactics.