INSTEX: Start of Financial Transactions between EU and Iran

The German Foreign Minister, Heiko Maas, confirmed on March 31, that Germany, France and the U.K. have conducted the first financial deal with Iran through the INSTEX mechanism for trade exchanges.

The German Foreign Ministry stated that some E.U. countries have delivered medical supplies to Iran in the first transaction, according to the INSTEX mechanism for commercial barter to dodge the U.S. sanctions imposed on Tehran.

“France, Germany and the United Kingdom confirm that INSTEX has successfully concluded its first transaction, facilitating the export of medical supplies from Europe to Iran, these supplies are now in Iran INSTEX and its Iranian counterpart STFI will work on more transactions and enhancing the mechanism,” the ministry added without providing further details.

A spokesperson of the Iranian Foreign Ministry has confirmed that Iran received medical supplies or financial aid from Germany, Azerbaijan, China, the United Arab Emirates, France, Britain, Japan, Qatar, Russia and Turkey.

At the end of January 2019, Germany, France and the U.K. established a new financial mechanism called INSTEX, attempting to prevent the collapse of the nuclear deal after U.S. President Donald Trump withdrew from the deal.

On establishing the mechanism, European officials stressed that INSTEX would only cover food and medicine, but Iran insisted on expanding the scope of the mechanism to include broader financial and reciprocal operations that might be reflected positively on the indicators of Iranian economy.

The EU did not go beyond its focus on supply channels, and this might explain the Iranian discontent with the mechanism and criticizing E.U. officials.

The former EU High Representative Federica Mogherini said shortly after enacting the financial mechanism that it aims to allow E.U. companies dealing more freely with Iran in terms of goods, and including those subject to sanctions; and if the plan succeeds, it is likely to be more beneficial for small and medium companies that have no ties or branches in the U.S.

“Even if it’s limited, the INSTEX mechanism could eventually pave the way for something more ambitious,” Esfandiar Batmangilideg, the founder of the Europe-Iran Forum said.
Based in Paris, Instex operates as a clearinghouse, allowing Iran to continue exchanging its oil for other products or services necessary for its economy.

In addition to the founding countries, France, Britain and Germany, the countries of Belgium, Denmark, Finland, Norway, the Netherlands and Sweden have joined the mechanism.

It’s noteworthy that in 2018, Washington withdrew from the nuclear deal struck between Tehran and major countries, reimposing harsh sanctions on the Iranian Republic.

Earlier, France, Germany, and UK confirmed that the interest in joining the INSTEX barter mechanism is evidence of EU’s efforts to facilitate legitimate trade exchange between EU and Iran, highlighting EU’s adherence to the nuclear agreement concluded with Iran in 2015.

They stressed that “Iran should immediately abide by all its pledges” in the nuclear agreement, especially stopping enriching uranium by prohibited rates.

In this context, the U.S. news agency Bloomberg commented on these developments saying: “Creating a European trade channel with Iran is the key to E.U. efforts to save the nuclear agreement concluded in 2015, after the withdrawal of U.S. President Donald Trump from it, and what followed of negative effects on Tehran’s economy.”

“The UK, France and Germany’s pushing to enhance trading with Iran is another sign of European discontent with the U.S. President,” according to Bloomberg.

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