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Iran Says Financial Reforms Not Required For Trade With Europe

Foreign minister of France, Britain and Germany announcing the establishment of a special trade mechanism with Iran on January 31, 2019. File photo

An Iranian trade official has insisted that complying with international financial transparency rules has nothing to do with Europe’s efforts to facilitate trade with Iran.

The UK, Germany and France have established the Instrument for Trade and Exchanges (INSTEX) in a bid to satisfy Iran’s demands for trade despite U.S. sanctions. Iran in turn has set up a matching channel called Special Trade and Finance Instrument (STFI). But for nearly two years Iranian hardliners have prevented legislation demanded by the international watchdog FATF to make the country’s financial system transparent and guard against money laundering and financing of terrorism.

On May 10, the German foreign ministry spokesman Maria Adehbar commented that Europe’s efforts to facilitate trade depend on Iran complying with international financial standards. But the Iranian official in charge of STFI says implementation of the European trade channel has nothing to do with the ratification of the Financial Action Task Force (FATF) legislation by Iran.

"Iran has established the coordinating company with INSTEX, and now the ball is in Europe's court to make it operational," said Ali Asghar Nouri.

"Before the U.S. withdrawal from Joint Comprehensive Plan of Action (JCPOA or Tehran's nuclear deal with world powers), European banks used to work with Iran. So, there should not be any specific issue for them to do as before," Nouri said, adding, "INSTEX minimizes banking relations between the two sides to the least degree and such issues are of the least importance for this mechanism", Asghar Nouri said.

However, while the bills related to FATF have not yet been approved by Iran, Nouri claimed, "The related regulations to combat money laundering are approved and being implemented in Iran's banking system, now."

Insisting on the complexity of INSTEX, as a system that should be able to deal with U.S. sanctions, Ali Asghar Nouri marked that Iran had given about a year to Europeans to implement the mechanism, which seems an adequate length of time, and now expects them to implement the arrangement.

It has been apparent for months that Iranian foot-dragging in adopting full financial reforms would impede European efforts to help limited trade with Iran. A tug of war between the two sides has been going on quietly, with Iran saying Europe’s INSTEX should kick-in first and Europe moving at a leisurely pace, partly because Iran has failed to approve the required legislation.

Meanwhile, the U.S. Secretary of State Mike Pompeo has affirmed that as long as INSTEX is limited to "humanitarian deals," it would not be targeted by Washington sanctions imposed on the Islamic Republic.

The U.S. Representative to the EU, Gordon Sondland, also reiterated on April 11, that the era of the U.S.-Europe dispute over the Joint Comprehensive Plan of Action (JCPOA) or Tehran's nuclear deal with world powers is over.

"The SPVs (INSTEX) are Europe's attempt to appease Iran by showing that they are still trying their very best to facilitate proper transfers of payments to Iran. We believe that those SPVs are really nothing more than, and I've said it before, a paper tiger," said Sondland.

The Islamic Republic's Supreme Leader, Ayatollah Ali Khamenei has repeatedly called INSTEX a "meaningless" measure and "a bitter joke," adding that "Europeans should have stood up to the U.S. after it left the JCPOA and should have lifted all sanctions against Iran."