Central Bank of Iran (CBI) governor Abdolnaser Hemmati has urged Europe to waste no more time in commencing the first transactions on its Instrument in Support of Trade Exchanges (Instex) payment vehicle, a mechanism designed to shield businesses from US sanctions. Its latest remarks on Instex were "threadbare", he complained.
Iran has become increasingly annoyed at the slow pace of the three European powers behind the special purpose vehicle—France, Germany and the UK—in moving towards a start-date for Instex.
“The simplest solution to operationalise the Instex and STFI [Iran’s counterparty entity] mechanisms is for EU companies and entities to buy Iranian crude and for Europe to open a credit line for its exporters to start exporting to Iran,” Hemmati wrote in an Instagram post on May 13.
“More than a year ago, Europe was seeking a financial mechanism for trade with Iran that was finally introduced three months ago,” added. “It’s nearly two months since a parallel mechanism to Instex, the Special Trade and Financing Instrument between Iran and Europe (STFI) was set up in Tehran and its managers were introduced to the Europeans,” Iran’s top banker also noted.
Iran officially launched its STFI on May 1, just as the US announced it was cranking up its sanctions campaign against Iran by adopting a strategy in which it will not tolerate any Iranian oil exports with waivers, which it had done for the previous six months on behalf of eight countries including China, India and Turkey.
Instex still not ready for sanctionable trades
France, Germany and the UK on January 31 announced the establishment of Instex to enable food and medicine transactions. Food and medicine trades with Iran are not subject to US sanctions. The EU has said it intends to add sanctionable trades to those that can be conducted via Instex, but little has been said publicly as to what extent and when such a move in defiance of Washington could be made.
The British, French and Germans addressed the difficulty of creating Instex by devising a model that shares the risk of US reprisals—the payment channel is based in Paris, it is managed by German banker Per Fischer, who was head of financial institutions at Commerzbank between 2003 and 2014, and it comes with a board that has UK decision-making participation.
But the US continues to treat Instex as a paper tiger.
On May 14, RFE/RL reported US special representative for Iran as saying of Instex that "the Iranians have not put in place the transparent financial system that allows this to be operational, so, I'm not sure it will ever get off the ground". "We don't see any corporate demand for it," Hook reportedly added.
Iranian ambassador to the UK Hamid Baeidinejad on May 14 reminded Europe in an interview with the Guardian that it has 60 days to ease Iranian oil sales in the face of the US sanctions designed to push them to zero or else see the end of the nuclear deal.
The accord was intended to lift heavy economic sanctions on Iran in return for it limiting its nuclear programme to agreed civil requirements and allowing international inspections. But since Donald Trump took the US out of the agreement in May last year, the threat of US secondary sanctions and the removal of all oil export waivers have, according to some analysts, cut Iranian oil exports by to 1m b/d or less from a peak of 2.8m b/d enjoyed while the nuclear deal still retained the US as a signatory. Exports could fall as low as 500,000 b/d in May.
Whether China, India and Turkey might disregard Washington’s sanctions threat and continue with major imports of Iranian oil is still not clear. The Chinese position might be tied to the outcome of its trade war talks with the US