One day after Germany France and the UK launched INSTEX (Instrument In Support Of Trade Exchanges) to help reduce the impact of sanctions on Iran there are still speculations about the measures' effectiveness, with some saying INTEX simply has symbolic significance.
INSTEX is supposed to be a financial channel and a special mechanism for transferring money in spite of U.S. sanctions on Iran. Its objective is to facilitate Iran's transactions with European companies.
The reaction of Iran's foreign ministry on Friday was not very enthusiastic, as its spokesman emphasized that his country is waiting for tangible economic benefits and Europe better deliver it soon.
Major European companies working with Iran left the Islamic Republic during the Summer of 2018 before the United States re-imposed its sanctions against Tehran following the United States' pull-out from the 2015 nuclear deal. Their unilateral decision to leave was based on their greater business interests in the U.S. than in Iran.
When Europe began discussing a special trade mechanism, the U.S. objected and lobbied allied capitals to eliminate or restrict this possibility. Perhaps as a result of Washington’s pressures European partners to INSTEX say that it is to be used initially for selling food, medicine and medical equipment to Iran although the scope of its usage could be expanded in the future.
Until Thursday January 31 the mechanism was referred to as SPV (Special Purpose Vehicle) and it was said to be a measure that would enable Iran to circumvent U.S. sanctions and ease trade between Iran and the world.
One Iran-born analyst in Germany commented, INSTEX "is not a European measure as there was no consensus among EU members and only Germany, France and the UK are committed to it, it does not guarantee oil purchase from Iran, it does not cover other countries such as China and Russia, it is only about food, medicine and medical supplies, and it is not a financial channel, it is an accounting company!"
INTEX was registered in France on Wednesday as a company with a capital of 3000 Euro. It is to be supervised by a Franco-German delegation chaired by former Commerzbank Governor Per Fischer. The company is to be financed by the three countries. Officially, it is to be later endorsed by EU's 28 members.
In 2015 Iran agreed to the nuclear deal with the West under the pressure of sanctions. Now the European parties to the deal are trying to offer concessions to the Islamic Republic in order to save the deal, also called the Joint Comprehensive Plan of Action (JCPOA).
Europe's initial plan was to enable Iran conduct barter trade in return for selling oil to Europe. Now, because of the sanctions, Europe buys very little oil from Iran and the new financial channel would be good only for small and medium size companies as big companies would not want to have any transactions with Iran because of their business ties with the U.S.
On Thursday, AFP quoted Belgium's Foreign Minister Didier Reynders as having said that "U.S. pressures has made business with Iran too risky." According to Reynders, it is up to the companies to decide whether they want to work with Iran or not."
The US has frowned at the European measure and seriously warned those who want to circumvent U.S. sanctions about serious punishment. Meanwhile, Senator Tom Cotton has said that Europeans have to choose between doing business with Iran or the United States.
Meanwhile, according to Reuters, it took Europe several months to register the measure, and it will probably take a long time for it to become operational.
A European diplomat told Reuters that INSTEX will not make much of a difference, but it carries a significant political message to Iran: "that we are determined to save the JCPOA."
A Former US National Security Council Assistant for the Middle East, Rob Malley, told Reuters that INSTEX is "a symbolic political move" that can encourage Iran to remain committed to the JCPOA.