EghtesadOnline: The governor of the Central Bank of Iran says the European Union’s newly-launched trade mechanism, known as the Instrument in Support of Trade Exchange (INSTEX), needs to be financed by importing oil from Iran to ensure its sustainable operation.
In an Instagram post on Sunday, Abdolnasser Hemmati added that if Europeans currently face obstacles to purchasing oil from Iran, they can open a long-term credit line for Iran to be later repaid through oil import.
He referred to the similar approach taken by Europeans during the negotiations that led to the creation of the mechanism, noting that this can be “a temporary and noteworthy solution”.
As part of efforts undertaken to protect Iran’s economic interests as per the terms of the nuclear deal between Iran and the six world powers in 2015, France, Germany and the United Kingdom—the three European signatories to the deal—created INSTEX in February, according to Financial Tribune.
INSTEX is aimed at facilitating legitimate trade with Iran by circumventing sanctions reimposed by US President Donald Trump after he unilaterally pulled out of the deal a year ago.
The mechanism was in limbo for about five months before Europeans announced on Friday that INSTEX is finally operational.
Following the 12th meeting of the Joint Commission in Vienna, Austria, held regularly to ensure the protection of the nuclear deal, the remaining signatories to the deal announced in a statement that INSTEX is up and running and it is processing the first transactions.
The CBI governor reiterated that INSTEX must operate on the basis of the framework outlined by the nuclear deal (officially known as the Joint Comprehension Plan of Action).
“INSTEX has to be based on JCPOA’s terms and not whatever imposed by US sanctions,” he wrote, adding that INSTEX should facilitate all transactions enshrined in JCPOA.
In addition, Hemmati recalled the INSTEX mission, which was initially espoused to conduct non-dollar transaction of goods not included in the US sanctions list, while reiterating that the mechanism should be later extended in scope to cover all other goods.
The top banking official pointed to ongoing plans for allowing other parties involved in the landmark nuclear deal to join INSTEX.
“There are various patterns under development for JCPOA’s supporters to join INSTEX, or any other independent trade mechanism,” he wrote.
The CBI chief was alluding to parts of the EU statement, which says “some EU member states are in the process of joining INSTEX” and that the main shareholders of INSTEX are working to open it to “economic operators from third countries.”
However, Hemmati noted that the contribution of INSTEX to a wider strategy for regulating the foreign exchange market is limited, stressing that the bank has other plans on the agenda to implement its forex policies.