After extended diplomatic talks on Iran's threat to exceed nuclear treaty limits, the European Union announced Friday that it was finally launching an alternative financial mechanism to facilitate international commerce with Tehran, circumventing U.S. sanctions.
The barter mechanism, INSTEX, is part of Europe's attempt to salvage the Joint Comprehensive Plan of Action (JCPOA, or "nuclear deal") which saw Iran cease work on its nuclear program in exchange for lifting of international sanctions. The United States unilaterally withdrew from the agreement last year, reimposing strict sanctions on Iran's oil exports and effectively closing off Iranian access to Western financial markets.
Iran has so far complied with its part of the nuclear deal, according to international monitors, but it has threatened to exceed the agreement's limits on uranium enrichment if Europe does not do enough to offset the effects of American sanctions. INSTEX is part of a yearlong EU effort to maintain commercial ties with Iran, but until Friday, it had not begun operation.
"INSTEX now operational, first transactions being processed and more EU Members States to join," said Secretary General of the European External Action Service (EEAS) Helga Schmid in a Twitter post Friday.
INSTEX is targeted at trade in essential goods - food, medicine, humanitarian aid - but is not expected to handle payments for Iranian oil. Energy exports are key to Iran's economy and to the operations of the Iranian government, and Tehran has made it clear that it wants to see European oil purchases if it is to remain in compliance with the JCPOA.
"It is still not enough, and it is still not meeting Iran's expectations. I would certainly report back to Tehran that developments which took place in this meeting, the progresses we made in this meeting, and the final decision obviously would be by Tehran to take," Iran's Deputy Foreign Minister Abbas Araghchi said after talks Friday.
The United States made clear that it opposes INSTEX. Brian Hook, the U.S. special representative for Iran, said Friday that European nations cannot "do business with the United States and Iran" and the same time. (Europe-based multinational corporations have already reached this conclusion, and few large enterprises are expected to renew business ties with Iran using INSTEX.)
"Countries don't do business in Iran . . . companies do business in Iran," Hook said. "We have not seen any demand for [European] companies doing business in Iran, because they would much rather do business in the United States market than do business in the Iranian market. If you look at trading volumes, the EU does more trade with Kazakhstan than it does with Iran."
The Maritime Executive
