No Goods Traded with Iran via INSTEX a Year after EU Launched Mechanism

No goods whatsoever have been traded between Iran and the EU via INSTEX, the special mechanism launched by the latter to salvage the Iranian nuclear deal, even though INSTEX was launched exactly one year ago.

INSTEX – Instrument in Support of Trade Exchanges – a European special purpose vehicle (SPV) designed precisely to keep trade with Iran flowing through barter and non-USD, non-SWIFT transactions, while shielding both EU and Iranian companies from US sanctions – was

It was designed as a remedy to the sanctions the US imposed on Tehran in May 2018 when the Trump Administration pulled out of 2015 Iranian Nuclear Deal.

INSTEX has been championed and created by the EU3 – France, Germany, and the UK, with the backing of the EU – in order keep trade going without breaching US trade sanctions, and thus getting Iran to keep observing its end of the 2015 agreement (JCPOA)

The creation of INSTEX was announced on January 31, 2019, a year ago, by the foreign ministers of France, Germany and the UK – and yet no goods have been exchanged so far through the trade mechanism, DW reports.

The Iran-EU trade initiative is headed by German diplomat Michael Bock and based at the French Finance Ministry in Paris. To reduce the backlash from the United States, the mechanism is set up for the trade in humanitarian goods only: pharmaceutical, medical and food products, which are exempt from US sanctions anyway.

“We are not even at the stage where we can pass on a phone number when a company calls us asking to be put in touch with Instex,” Michael Tockuss of the German-Iranian Chamber of Commerce is quoted as saying.

In his words, INSTEX is presently irrelevant to EU-Iranian trade, and for the past six months, Instex has been little more than “a political project aimed at fostering Iran’s hopes.”

According to the German Statistical Office, Germany and Iran traded goods worth EUR 1.5 billion in 2019, half of what the two countries traded in the years before, as companies are increasingly scared to trade with Iran because of the US sanctions regime.

“One should properly know one’s abilities before making such commitments,” Iranian Ambassador to Germany Mahmoud Farazandeh recently said.

“When you issue a check, you should first make sure you have money in your bank account so you can honor your commitment,” he added with respect to German promises with respect to INSTEX.

An unnamed INSTEX source is quoted as explaining the situation as follows:

“The Iranians were skeptical if there would be further trade after the first transaction. Tehran needs reassurance that this is not just a test but that further deals are planned. Iran has had to agree all kinds of aspects connected to the transaction mechanism with three European states, and that unfortunately takes a lot of time.”

There have been questions as to whether INSTEX enjoys sufficient political support in order to take off.

“One can conclude from this that [the trade mechanism] does not have sufficient backing from high-ranking political figures,” Sascha Lohmann of the German Institute for International and Security Affairs said, while also noting continuing US displeasure at the mechanism.

“I think that supervisory board members and ministry undersecretaries are aware of the risk they might be banned from entering the US if the country takes action against them or INSTEX,” he added.

That Instex has not lived up to expectations is an open secret. At the German government’s press conference on January 15, admitted that

“We are unable to provide the economic opportunities that Iran expected from this arrangement and which have now vanished due to the US withdrawal. We cannot fully compensate for this,” German Foreign Ministry spokesman Rainer Breul admitted at a government press conference on January 15, 2020.