Abu Dhabi, UAEFriday 24 May 2019

Europeans launch sanctions-buster trade mechanism for Iran

INSTEX is located in France and has a German managing director

The special purpose vehicle should allow Iran to continue to trade vital goods like medicine and food. Reuters
The special purpose vehicle should allow Iran to continue to trade vital goods like medicine and food. Reuters

The UK, Germany and France have officially set up a European mechanism to enable non-dollar trade with Iran, thereby circumventing US sanctions against the nation.

A joint statement from three countries (E3) foreign ministers said the platform would be strictly focused on commercial contracts between Europe and Iran. "INSTEX will support legitimate European trade with Iran, focusing initially on the sectors most essential to the Iranian population – such as pharmaceutical, medical devices and agri-food goods. INSTEX aims in the long term to be open to economic operators from third countries who wish to trade with Iran and the E3 continue to explore how to achieve this objective," the statement said. "The creation of INSTEX is a major first step taken by E3 countries today. The operationalisation of INSTEX will follow a step-by-step approach: The E3 together with INSTEX will continue to work on concrete and operational details to define the way the company will operate; the E3 will also work with Iran to create an effective and transparent corresponding entity that is required to be able to operationalise INSTEX."

The Special Purpose Vehicle (SPV) trade intermediary has been in the planning for four months, following a declaration from EU Foreign affairs leader Federica Mogherini in September. She said it would “assist and reassure economic operators pursuing legitimate business with Iran,” by giving them a way to trade with the nation without taking on liability for flouting US sanctions.

The SPV, called the Instrument in Support of Trade Exchanges (INSTEX) will facilitate trace of essential goods, such as food and medicine coming mainly from the EU to Iran.

INSTEX has been set up in France, with a German managing director in a coordinated European effort to counterbalance the US economic power displayed by its sanctions policy.

Its address is the French economy minister and senior officials from all three countries sit on its board.

The European Union remains a signatory to the 2015 Joint Comprehensive Plan of Action (JCPOA) agreement, which limits Iran's nuclear ambitions in return for a lifting of sanctions on Tehran.

The deal was pitched into an uncertain future after the US left the agreement and insisting its allies also reviewed their commitment to an agreement that has funded Iran's expansionist foreign policies.

Jeremy Hunt, the British foreign secretary, said Europe's commitment to the 2015 deal did not represent a blank cheque for Iran in other aspects of its conduct. "The Iran nuclear deal remains central to international efforts to halt nuclear proliferation and is crucial for the security of the region," he said. "But we are clear, this commitment does not in any way preclude us from addressing Iran’s hostile and destabilising activities."

"It won't change things dramatically, but it's an important political message to Iran to show that we are determined to save the JCPOA and also the United States to show we defend our interests despite their extraterritorial sanctions," one European diplomat said.

The formation of INSTEX comes at a time of strained relations between the EU and Iran. In the beginning of January, the EU added two Iranian individuals and an Iranian intelligence unit to the bloc's terrorist list, following a series of attacks and botched plots on EU soil for which member states blame Iran.

Updated: January 31, 2019 10:33 PM