Page 5 - IRANRptMar19

January 31 brought some good news in the fight to fend off the Trump administration’s attempts to throttle the Iranian economy – Europe finally announced the registration of a special purpose vehicle it intends to use to help build up sanctions-shielded trade between Iran and EU member states. However, the mechanism—named Instex (Instrument In Support Of Trade Exchanges)—will start off with very modest targets and opinion is divided on how far it can progress.
2.0 Politics
2.1 Europe inches forward with Instex plan to circumvent
US sanctions on Iran
Far cry from original plans
It’s three months late, will at least initially only deal with food and medical products not affected by sanctions and has been dismissed by US officials as a “paper tiger”—but will the new non-dollar payments system announced by the UK, Germany and France on January 31 to allow European businesses to trade with Iran without falling foul of US sanctions have enough symbolic political value to give a shot in the arm to Tehran?
Establishing the payments system, a special purpose vehicle (SPV) named the Instrument In Support Of Trade Exchanges (Instex), proved very challenging because a European Union member state willing to host it could not be found. The British, French and Germans overcame this difficulty by devising a model that shares the risk of US reprisals—the payment channel is based in Paris, is managed by a German banker—Per Fischer, Head of Financial Institutions at Commerzbank between 2003 and 2014—and comes with a board with UK decision-making participation.
Iran’s deputy foreign minister Abbas Araqchi said in response to the registering of Instex that the success of the mechanism would now depend on expert meetings that Iran is set to have with the Europeans, including between central banks. “It is a first step taken by the European side ... We hope it will cover all goods and items,” Araqchi told Iranian state TV.
But it is not just the Iranians who hope Instex—unlikely to become operational for several more months—will produce some tangible success. Europe too attaches real importance to expanding trade with Iran in the face of the US sanctions given that it intends to assert European economic sovereignty in response to the Trump administration’s unilateral foreign policy directed at the Iranians, policy it is seeking to impose on the Europeans. The EU, meanwhile, stung by the unilateralism of the current White House, is studying plans to challenge dollar dominance in world trade.
After Instex was announced, EU foreign policy chief Federica Mogherini was quick out of the blocks to state that the plan is for the vehicle to eventually expand to allow European firms to trade more freely with Iran in a range of goods, including those subject to US sanctions. But Instex, as it stands, is a far cry from original purported plans to make it a clearinghouse for Iranian oil bartered in exchange for goods from Europe via ports in Italy
5 IRAN Country Report March 2019 www.intellinews.com