INSTEX Halted Due to EU Procrastination in Bank's Introduction to Iran

Published July 7th, 2019 - 09:02 GMT
Iran set up and registered a counterpart to INSTEX called Special Trade and Financing Instrument between Iran and Europe (STFI) to pave the way for bilateral trade. 
Iran set up and registered a counterpart to INSTEX called Special Trade and Financing Instrument between Iran and Europe (STFI) to pave the way for bilateral trade. (Shutterstock)
Highlights
President Rouhani warned if Europeans choose to avoid practical steps, Iran will further modify its nuclear deal undertakings from July 7

The Managing-Director of the Special Trade and Finance Institute, the Iranian special trade mechanism set up to reciprocate the European Instrument in Support of Trade Exchange, blasted Europe for procrastinating in introduction of a bank to Iran to put the INSTEX into effect.


"At present, our demand from the European sides is that they introduce a bank to us to be the interface between the Iranian and European buyers and sellers," Ali Asqar Nouri said on Saturday.

"Some consultations have been held on this issue but no bank has officially been introduced to us," he added.

While Iran has set up SATMA (Special Mechanism for Iran-Europe Trade and Financing) as a corresponding company to facilitate interaction with INSTEX, the Europeans have failed to introduce a bank for making a connection between the buyers and sellers of the two sides, Nouri said.

He stressed that INSTEX needs to provide Iran with its petrodollars, adding that the European parties should purchase Iran’s oil, wire the money into the account of the equivalent Iranian company, and allow Tehran to use those finances for imports.

Nouri added that even if the European countries cannot buy Iran’s oil, then they should set up a credit line for Iran, provide the Islamic Republic with financial credits, and receive the installments after the sale of Iranian oil.

He dismissed any official plan for Russia and China to join INSTEX, saying the payment channel, as a trade company, is founded by only three shareholders, namely France, Britain and Germany, adding that any new country intending to join the INSTEX will have to abide by the French trade regulations.

Nouri said that a pilot import undertaking has been coordinated with INSTEX, but its payment settlement is contingent on either selling Iran’s crude oil or opening a credit line that should be repaid using Iran’s oil revenues.

Germany, France and Britain, the three European signatories to the Iran nuclear deal of 2015, created a Special Purpose Vehicle (SPV) for trade with Iran called the INSTEX late in January. The channel hasn’t had any financial transaction with Iran yet. 

Exactly one year after President Donald Trump unilaterally withdrew from the nuclear deal, Iran announced it will scale down parts of its commitments within the pact, giving Europe 60 days to either normalize economic ties with Iran or accept the modification of Tehran’s obligations under the agreement. 

Iran set up and registered a counterpart to INSTEX called Special Trade and Financing Instrument between Iran and Europe (STFI) to pave the way for bilateral trade. 

Then on June 28, Secretary General of the European External Action Service (EEAS) Helga Schmid announced that INSTEX has become operational.

"INSTEX now operational, first transactions being processed and more EU Members States to join. Good progress on Arak and Fordow projects," Schmid wrote on her twitter account after a meeting of the Joint Commission on JCPOA ended in Vienna following three and a half hours of talks by the remaining signatories to the deal (the EU3 and Russia and China).

It was the 12th meeting of the Joint Commission on JCPOA in Vienna.

Meantime, seven European countries--Austria, Belgium, Finland, the Netherlands, Slovenia, Spain and Sweden--in a joint statement expressed their support for the efforts for implementation of the INSTEX.

Later, Iranian Deputy Foreign Minister Seyed Abbas Araqchi described the nuclear deal joint commission meeting with the Europeans as "a step forward", but meantime, reminded that it did not meet Iran's expectations.

“It was a step forward, but it is still not enough and not meeting Iran’s expectations,” said Araqchi, who headed the Iranian delegation at the JCPOA joint commission meeting in Vienna.

Last week, Iranian President Hassan Rouhani blasted the European states for offering a futile INSTEX to Tehran, stressing that his country would definitely take more steps to modify its nuclear deal undertakings to bring his nation's merits and obligations into balance.

"The Islamic Republic of Iran's patience has been interpreted by some world leaders as a strategic patience and today, after one year, giving up certain reversible undertakings (by Iran) cannot be protested," President Rouhani said, addressing a cabinet meeting in Tehran.

He described the INSTEX as a theatrical move by the Europeans, and said, "Today, INSTEX is just a mechanism empty of cash and an empty INSTEX is of no use at all, but if the INSTEX becomes operational and Iran's crude revenues can be retrieved through it, we can accept it to some extent irrespective of its shortcomings."

President Rouhani warned if Europeans choose to avoid practical steps, Iran will further modify its nuclear deal undertakings from July 7. "The level of Iran's enrichment will not be limited to 3.67% anymore from July 7 and this undertaking will be called off and we will enhance the (enrichment) level to the extent we need."

"If the other sides avoid complying with all their undertakings based on the timeline, from July 7, the Arak (heavy water) reactor will also return to its previous conditions, the conditions that they (the West) claimed was dangerous as it could produce (a larger volume of) plutonium, unless they abide by all their obligations with regard to the Arak reactor," he added.

"Iran advises Europe and the US to get back to logic, the negotiating table, understanding, respect for law and respect for the UN Security Council resolutions, which means that everyone should act based on the nuclear deal," President Rouhani said.

He, meantime, said that the measures Iran was adopting due to the other sides' disloyalty to their nuclear deal obligations were all reversible, and added, "Iran never intends to show willfulness towards others and violate the agreement."

The Iranian president said that the country's move to exceed the 300-kg limit for its enriched uranium stockpile was aimed at protecting the nuclear deal and persuading others to remain committed to their undertakings. If the other side proves its loyalty to the deal, Tehran will also rapidly return to the previous conditions and will sell its excess enriched uranium to Russia in return for yellow cake, he continued.

He also referred to Iran's warning to exceed the 130-ton limit for its heavy water stockpile, and said, "If the terms of the (nuclear) agreement are respected, a return to a figure less than 130 tons could be done fast."


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