EghtesadOnline: French Finance Minister Bruno Le Maire said on Thursday he hopes the EU special trade mechanism, known officially as Instrument in Support of the Trade Exchange (INSTEX), completes a first limited transaction in the coming days.
Set up by France, Britain and Germany, INSTEX is a barter trade mechanism that aims to avoid direct financial transfers by offsetting balances between importers and exporters on the European side.
According to Reuters, the mechanism is aimed at making it possible for trade between European Union members and Iran to continue in the face of stiff US sanctions since Washington quit a 2015 nuclear accord between Tehran and world powers last year.
Those sanctions have effectively hit Iran’s economy by clamping down on its oil sales, Financial Tribune reported.
“We want INSTEX to enter into force in a few days and I hope that we will be able to operate in a few days. I hope the first transaction will be completed in a few days,” Le Maire told journalists at a meeting in Poland.
“The first transaction will be a limited one, but this is a starting point and we expect INSTEX to be an efficient tool,” Le Maire added.
Iran has said it wants to keep the nuclear deal alive, but must receive the promised economic benefits. On Monday, it said it had amassed more low-enriched uranium than permitted and said it will announce further measures on July 7.
France’s Foreign Ministry said on Wednesday that INSTEX would become operational based on Iran’s “full compliance with its JCPOA [Iran nuclear deal] commitments”.
“We aren’t going to press the yes button if there are doubts about its compliance,” said one European diplomat.
Two other European diplomats said that while possible transactions had been identified, it was too early to move ahead as due diligence was still underway and that as of yet the Iranian side had still to complete a mirror company that would facilitate the process.
However, two months after the creation of INSTEX, Iran set up a corresponding financial mechanism in March. The Iranian reciprocal entity, known as the Special Trade and Finance Institute, was officially registered in April as a private company based in Tehran.
The European advanced payment system is expected to enable some small transactions soon.
Even then, the system initially will only deal in products such as pharmaceuticals and foods, which are not subject to US sanctions.
Dismissing this as insufficient, Iranian officials have repeatedly said INSTEX must include oil sales, or provide substantial credit facilities for it to be beneficial.