Gordon Campbell on the EU’s battle with Washington over Iran

Right now, there is a major de-stabilising force in the Middle East and a prime funder of global terrorism – and it isn’t Iran. It is the young, unstable Crown Prince Mohammed bin Salman of Saudi Arabia who this week, picked a huge diplomatic fight with, of all countries, Canada. After Canada’s Foreign Ministry tweeted its support for international human rights law and mildly criticized the Saudi monarchy’s wholesale jailing of Saudi feminists, the Crown Prince went absolutely bonkers.

He not only kicked out the Canadian ambassador to Saudi Arabia, but also forbade thousands of Saudi students from continuing with their studies at Canadian schools and universities. As Foreign Policy magazine concluded:

Some analysts have suggested that the episode is another example of Saudi Arabia’s reckless foreign policy under Crown Prince Mohammed bin Salman. Others see it as another warning to Saudis that the only reforms in the kingdom are those that the Crown Prince has articulated, and they are at their peril should Saudis demand more. Both explanations are plausible—and either way, Mohammed bin Salman comes out looking every bit the impetuous, petty, immature, tyrant that his critics say he is.

This latest outburst comes on top of the Crown Prince’s failed blockade and intended invasion of Qatar (and the related aim of shutting down al Jazeera) and his wholesale jailing of political rivals. His indiscriminate attacks on civilians in Yemen has triggered what is – according to the UN – the world’s worst current humanitarian crisis, in the course of which the Saudis have reportedly paid off al Qaeda, to induce it to sit on the sidelines.

Despite all that, the Crown Prince (and an equally unstable US President) remain fixated on Iran – whose Shia mullahs have, by comparison, minimal influence across the Sunni regimes of the Middle East and North Africa. What limited regional influence Iran has is restricted to Lebanon, Iraq, and (insignificantly) to Yemen. Besides, the annual military budget of Saudi Arabia alone (let alone that of Iran’s enemies like Israel, Egypt and the UAE) is four times that of Iran, and the Saudis are using it to buy vastly more modern weapons from the US.

Forget about “free” trade, too. Currently, the US is dictating which countries New Zealand and other democracies are allowed to trade with, under fear of sanctions being leveled by Washington against our exporters. Luckily, at least the European Union is standing up to the Washington bully – and the EU chose a press conference in Wellington this week to make its defence of the international rules-based system perfectly clear.

Talking back to tyrants

It came as something of a surprise, though. Usually, one of the most frustrating pageants in political journalism is the one where the Distinguished Overseas Guest gets to exchange a few pleasantries in public with their Distinguished Local Equivalent, with the flags of the two nations as a backdrop. In their supporting role in the show, the assembled 20 or so local media are routinely allowed to ask only two or three questions (at most) one of which tends to be the equivalent of “So, why are you here/why is this visit significant?”

Yet this week, the EU foreign policy chief, Federica Mogherini proved the exception that made the whole pantomine worthwhile. She used the occasion in Wellington to challenge the White House intensely, over Iran. What triggered this was a question I asked Mogherini about the adequacy of the EU response to those sanctions the Americans are threatening to impose on any country that dares to keep on trading with Iran. The first round of the US sanctions kicked in this week.

As mentioned above, when the US sanctions fully bite in November, our American friends will torpedo New Zealand’s circa $173 million (and growing) annual trade with Iran. Shipping stuff to Iran and getting paid by them for your goods and services will by then, also become virtually impossible. In addition, the US has decided to scrap the nuclear deal with Iran despite Teheran’s full compliance with its side of the bargain.

Given New Zealand’s long support for anti-nuclear issues, we therefore have a dual interest in the survival of the Iran deal – for the obvious reasons of trade, but also because the Iran deal limits the spread of nuclear weapons in the Middle East. On Tuesday, I asked Mogherini about the effectiveness of the defensive measures – eg the EU’s so-called ‘statute blocking’ mechanism and the alternative banking arrangements the EU is trying to put in place – in order to protect any European firms investing in Iran.

What does this entail? Well, to get around the US forbidding any forms of greenback -denominated trade, the EU is talking about (a) trying to arrange direct financial transfers between its banks and the central bank of Iran, and is also (b) creating a fund for EU small businesses, to enable them to be compensated for continuing to trade with Iran.

What the EU said

For the record, here’s Mogherini’s full reply to my questions. In the process, she delivered a useful off-the-cuff backgrounder about the issues at stake:

Mogherini: “We are working within the European Union and with other partners in the world – among them New Zealand but also Asian partners – to protect investments and to keep channels open, especially when it comes to the trade volume, and petrochemicals, but also when it comes to banking channels. So we discussed that in quite a lot of detail [with Foreign Minister Winston Peters and MFAT officials] and we agreed that experts from New Zealand will exchange with experts from the European Union, especially on the financial aspects of how to maintain these channels.”

Werewolf: “You’ve got the statute blocking mechanism, and you’ve talked of alternative financial arrangements [to enable non-US dollar denominated trade] What’s the current state of those measures, and are they likely to be effective?”

Mogherini: “We in the European Union have updated our blocking statute – you're very much up-to-date with this legislation. The European Union has [this] in place to protect businesses from the effect of secondary sanctions, the sanctions that the US imposes outside of its territory. We believe that it has to be up to the Europeans in this case, to decide whom to trade with. So there is also a matter of trade sovereignty to be protected. This blockage statute has now been updated. So this legislation protects European businesses from the effect of the US sanctions, indicating to these companies that they should comply with European legislation rather than with [an] American one….

“Apart from that, we are encouraging small and medium enterprises in particular to increase business with, and in, Iran, as part of something that for us, is a security priority. I want to make this very clear. We’re talking about trade and economic relations with Iran, because this is an integral part of the nuclear deal. The trade that the European Union has with Iran compared with the trade we have worldwide, is very little. But, it is a fundamental aspect of the Iranian right to have an economic advantage in exchange for that they have done so far – which is, being compliant with all their nuclear-related commitments.

“So the deal has two parts. Iran gives up a nuclear programme and the international community opens up trade and economic relations with Iran. This second pillar has to be maintained if we want the first piIlar to be maintained. And so far Iran has been compliant, fully, with their nuclear commitments. The IAEA has verified several times – eleven reports – that Iran is compliant. A new report will come up soon. We are doing our best to keep Iran in the deal, to keep Iran benefitting from the economic benefits that the agreement beings to the people of Iran. Because we believe that this is in the security interests not only of our region, but also of the world. If there is one piece of international agreements on nuclear non-proliferation that is delivering, it has to be this deal.”

Right. Presumably, one has to take Mogherini seriously and assume that this is not just dutiful posturing on Europe’s part, even though here (and in Europe) companies are dropping off like flies from trading with Iran, for fear of losing their access to American markets. Unfortunately, the EU has so far been more talk than action when it comes to creating those alternative banking channels between Europe and Iran’s central bank. The banking/payment alternatives just haven’t come to much, at least not yet. One can but hope. Meanwhile, Iran’s economy appears to be collapsing, internally.

As mentioned, the Iran sanctions crunch will come in early November. Here’s yesterday’s Guardian account of what Mogherini said in Wellington, and here’s her similar message to Trump, as reported on the US Politico site.

Via the wire service, Mogherini’s comments in Wellington even made the news in Brownsville, Texas.

Weirdly, Trade Minister David Parker tried to claim yesterday that most of New Zealand’s current trade with Iran would fall under the permissible “humanitarian” exemption for food and medicines that the US government issued back in 2013. Really? Does Parker seriously think – after NZ failed to win an exemption from US tariffs for our steel and aluminium exports – that our burgeoning commercial butter exports to Iran would be seen by the Americans as constituting “humanitarian aid”? Why would we assume that the criteria for administering Iranian trade sanctions dating back from the Obama era would still hold any relevance at all in today’s decision making climate in Washington?

Moreover… much as those of us sitting in the cheap seats may roll our eyes at the US President’s stream of tweets, they cannot simply be ignored by countries trying to engage rationally with Washington. Thus, it seems quite bizarre for Parker and his MFAT trade advisers to pick the sensitive area of Iranian policy to downplay and disparage the fulminations of the Tweeter-in Chief.

Oh, and there’s Brexit, too.

We do need good friends in Europe. (Funny that, since only a few years ago that McCully fellow was insisting Europe was old hat, and that MFAT should be all about Asia.) The other storm cloud on the trade horizon is the prospect – rated last weekend by UK international trade minister Liam Fox as a 60/40 likelihood – that the UK will crash out of Europe with a “no deal” Brexit, when Judgment Day finally arrives at 11pm on Friday, March 29, 2019.

To be sure, Fox was probably trying to pump up the volume that a “No Deal” Brexit would be a lose/lose for both sides and not merely for Britain, and thereby maybe win a bit of leniency from Brussels for Theresa May. Faint hope. The UK may postpone Doomsday, but it won’t be able to cherry pick the concessions it needs to avoid doing itself major damage. In this game of chicken, it is likely the EU will grudgingly extend the Brexit deadline and give the UK a bit more time to get its act together. Even then, the EU wil probably delay saying so to the Brits, all the better to put the frighteners on Theresa May and her hapless crew. Already though, there is talk of stockpiling food and medicines in Britain.

Unfortunately, a ‘no deal Brexit’ will also inflict collateral damage on New Zealand’s existing ability to deliver its goods to its EU and UK markets. Presumably our current terms of trade access to Europe would expire on March 29th next year, if a “No Deal” outcome happens. Optimists would say that we could then start afresh and win new and better market access. A rather larger group of pessimists would conclude we will be worse off once Brexit happens, no deal or otherwise. With that in mind, I also asked Mogherini (at a separate event on Tuesday with Prime Minister Jacinda Ardern) to explain why, in principle, the EU is reportedly wanting New Zealand to split its current farm quotas in future between the EU and the UK. Again, her reply in full:

Mogherini: “I was surprised I was not getting any UK-related questions (laughs.) In the context of negotiations on their decision to leave the European Union, we are also looking at the consequences this has on… an enormous kind of issues that have to do with relations with third countries and partners. And these relate also, to the issue you mentioned. We are determined to address this, first of all, in consultation with our partners. And secondly, in the context of the WTO. Because when we say we want to uphold the rules-based system, this is particularly true of that. So, we are looking at ways in which there would be nothing less, and nothing more. Simply a reasonable way to manage a new situation that is to come by March next year. This is a conversation we will have bilaterally, and in the context of the WTO, in the coming months, because we want to have the smoothest possible management of this situation.”

OK… not much there on the principle behind any proposed quota split. But the “nothing less, nothing more” bit is encouraging, even if there’s ample room for disagreement on just how that might be calculated by the European Union, post Brexit. For example: the EU is likely to tell us to subtract what it computes to be the UK market share of the current arrangements, tell us to pursue that separately with the UK, and wish us the best of British luck as we do so. Oh, and besides….here’s what we in the EU think the remainder is worth. Yikes And to repeat - while we’re still working out the formula for divvying up the worth of our access to the EU, sans Britain, the supply chains to Europe and the UK could end up in chaos, as of late March next year. Meanwhile, here’s a wee bit more on the question of our redmeat quotas to the EU.

Octavian Rules. So does Taylor Swift

The young French born, London-raised rapper Octavian has had a six month stream of impressive singles “Party Here” “Move Me” “Hands”) up to and including this charming video for “Little”. In it, Octavian deals with growing up, being fed, and the impact that celebrity brings in its wake. In his case, it seems hey, people are suddenly interested in how he’s feeling, rather than treating him as just an irritant in their way…

I got bigger, I used to be little (I feel alive)
My belly got full, now I've got that meal
They used to cuss, used to diss…

Now they ask me how I feel…

Of course, the ruling expert on how celebrity impacts on behaviour and perception is our old pal, Taylor Swift. On the “Delicate” song from her Reputation album, Swift alternates between the curiosity central to desire and the uncertainties thereof (“Sometimes when I look into your eyes I pretend you’re mine, all the damn time” gets whiplashed instantly by “Is it cool that I said all that, is it chill that you’re in my head?”)

Meanwhile, the video plays with the notion of just how invisible celebrities really are, in an age when they’re also omnipresent. And so she runs free, in the bubble of her aloneness - at least right up to her point of contact with her new crush, which is when the video freeze frames, and goes to black. It's not quite the finale to the Sopranos, but close to it. Taylor Swift as Tony Soprano, anyone?

To round things off, here’s Octavian again with what IMO is the best track of 2018, thus far…

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