Page 7 - IRANRptApr19

2.3 Europe inches forward with Instex plan to circumvent US sanctions on Iran
Far cry from original plans
US: No impact expected
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 and Greece. Oil, Iran’s big export earner, is for now entirely out of the equation.
“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 [Iran nuclear deal] and also the United States to show we defend our interests despite their extraterritorial sanctions,” one European diplomat was quoted as saying by Reuters.
Responding to the announcement of Instex, the US Embassy in Berlin said: "As the President has made clear, entities that continue to engage in sanctionable activity involving Iran risk severe consequences that could include losing access to the US financial system and the ability to do business with the United States or US companies."
It added that the US did not expect that Instex would "in any way impact our maximum economic pressure campaign" against Iran.
Belgian Foreign Minister Didier Reynders reacted to the formation of Instex by saying that while Europe did share some US concerns about Iran "at the end of the day it will be companies that decide whether or not they want to work in
7 IRAN Country Report April 2019 www.intellinews.com