The three governments announced the successful implementation of INSTEX at a meeting of the Joint Commission of the Joint Comprehensive Plan of Action (JCPOA) on June 28, 2019. The meeting was chaired on behalf of the EU by the Secretary General of the European External Action Service (EEAS), Helga Schmid, and was attended by representatives of China, France, Germany, Russia, the United Kingdom, and Iran. [...]
This was widely seen as a setback for the EU, which had been hoping that SWIFT would defy the U.S. and maintain payment services to Iran. But European governments were still determined to find a way of keeping trade with Iran going. If SWIFT wouldn’t help, they would create something to replace SWIFT for Iranian trade. Thus, INSTEX was born.
Exactly how does INSTEX facilitate trade with Iran without making sanctions-busting cross-border payments? In a word – barter. INSTEX matches the Euro payments of companies buying goods from Iran with the Euro receipts of companies selling goods to Iran. Imagine a company based in France wants to sell transport equipment to a buyer in Iran. Receiving Euro payments directly from that buyer would break U.S. sanctions. So instead, the French company would register the sale documentation with INSTEX. INSTEX would look on its own books for a company buying foodstuffs from Iran. It would match the two cash flows so that in effect the two European companies pay each other. The goods would still travel to and from Iran, but the money would stay entirely within the EU. [...]
Secondly, as the JCPOA statement indicated, the aim is to open INSTEX to third countries. China and Russia were both present at the meeting, and both have an interest in trading with Iran. Crucially, their trade could include oil. The European Council on Foreign Relations (ECFR) observes that “the SPV is more likely to succeed if it links with revenues related to Iran’s oil exports to countries such as China, India, and Japan.”
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