New mechanism to facilitate trade with Iran to be established

By Azernews

By Mirsaid Ibrahimzade

The governments of Germany, France and the UK have registered INSTEX (Instrument in Support of Trade Exchanges) to support trade relations of European countries with Iran, bypassing U.S. sanctions. This was reported by the German TV channel ARD on January 31.

The headquarters of the organization will be located in Paris, and it will be headed by a German citizen with banking experience. The chairman of the supervisory board, which will consist of representatives of the Ministry of Foreign Affairs of each of the three countries, will become a British.

The EU announced its intention to create a financial transaction mechanism (Special Purpose Vehicle, SPV) to support trade relations with Iran, evading U.S. sanction last fall. It was assumed that it will begin to act in December 2018. The mechanism should guarantee international financial transactions between Iran and the EU countries, regardless of the effect of U.S. sanctions.

For the first time, the need for a special payment mechanism for transactions with Iran was announced by German Foreign Minister Heiko Maas in August last year. 

Such a mechanism should work independently of the United States, the European Monetary Fund and the international bank payment system SWIFT.

In addition, Belgian Foreign Minister Didier Reynders said that Europe did share U.S. concerns about Iran but "at the end of the day it will be companies that decide whether or not they want to work in Iran, bearing in mind the risk of American sanctions."

On May 8, U.S. President Donald Trump announced Washington’s withdrawal from the Joint Comprehensive Plan of Action (JCPOA) - a deal that was concluded in 2015 and limited Tehran’s nuclear development in exchange for lifting the UN Security Council sanctions and unilateral restrictive measures of the United States and the European Union. The remaining parties to the agreement did not approve of the U.S. withdrawal from the agreement and remained committed to the previous deal.

On January 30, Iranian President Hassan Rouhani called the crisis caused by the sanctions the strongest crisis in the last 40 years since the Islamic revolution in the country.