Official Registration of Europe's Mechanism for Trade with Iran; Implementation of 'INSTEX' Postponed to the Future

On Thursday, February 1, three European countries announced the official registration of a special financial mechanism for trade with Iran under the name 'INSTEX' (Instrument in Support of Trade Exchanges), but they conditioned its activation on 'further work.' Jeremy Hunt, Heiko Maas, and Jean-Yves Le Drian, the foreign ministers of the UK, Germany, and France, announced at the end of a meeting of European foreign ministers in Bucharest, Romania, that this mechanism has been officially registered to maintain trade with Iran. The statement emphasized that Tehran's benefit from the advantages of this agreement is contingent upon the full implementation of its nuclear commitments within the framework of the JCPOA, including full and precise cooperation with the International Atomic Energy Agency. The statement continued: 'INSTEX supports legitimate EU trade with Iran, focusing primarily on sectors that are vital for the Iranian people, such as medicine, medical equipment, and food.' The foreign ministers did not specify a timeline for the commencement of this mechanism's activities, only referring to the registration of 'INSTEX' as a 'significant step' while stating that more work remains to be done. The statement added that the long-term goal of INSTEX is to enable third countries to trade with Iran through it. The French foreign minister described the establishment of this mechanism as a 'political action' aimed at protecting European companies from sanctions. Jeremy Hunt, the British foreign minister, also stated: 'Today, we took an important step forward in fulfilling our commitment under the nuclear agreement with Iran to ease sanctions for the Iranian people. We, the three European countries, have registered a new special mechanism that, when operational, will facilitate legitimate trade between Iran and the EU.' Although this financial mechanism has been officially registered, its activation has been postponed to the future. They stated that the establishment of INSTEX is a significant first step taken by these three European countries. The implementation of INSTEX will occur gradually: all three countries will work on the details and execution to clarify the path that companies should follow; they will also cooperate with Iran to create an effective and transparent entity necessary for the implementation of INSTEX. According to the mentioned statement, the three European countries will closely collaborate to resolve the technical and legal aspects required for the operation of this mechanism. The mentioned ministers stated: 'INSTEX will operate within the framework of high international standards that will consider anti-money laundering and counter-terrorism financing considerations.' In this regard, these three European countries have stated that they expect Iran to decisively implement all elements of the FATF (Financial Action Task Force) for this mechanism to be usable. The FATF has given Iran several opportunities to approve and implement laws related to preventing money laundering and financing terrorism, but the approval of these bills has faced strong opposition from hardliners and the Revolutionary Guards. Opponents of Iran's accession to FATF regulations, mostly appointed by the Supreme Leader of the Islamic Republic, argue that approving these bills would block the way for financial assistance to 'Hamas,' 'Hezbollah,' and similar groups. The statement from the foreign ministers of the three European countries states: The nuclear agreement with Iran remains the centerpiece of international efforts to prevent nuclear proliferation and is vital for regional security. However, we are aware that this commitment does not in any way prevent us from responding to Iran's hostile and destabilizing activities. Previously, the operation of this mechanism was supposed to begin in November of this year, coinciding with the return of the second round of US sanctions against Iran, but technical problems and concerns about Washington's penalties delayed its launch. INSTEX was registered on Wednesday in France, and its headquarters is also in the French Ministry of Finance. The presidency of this organization is held by Per Fischer, a former manager of Commerzbank in Germany, and it includes observers from the UK, Germany, and France. The registered capital of this mechanism is also three thousand euros, equivalent to three thousand and 447 dollars. Germany, France, and the UK will jointly manage this financial mechanism on behalf of the EU, with the aim of preserving the JCPOA and continuing trade between EU members and the Islamic Republic of Iran. Mohammad Javad Zarif, Iran's foreign minister, welcomed the registration of 'INSTEX' on Thursday evening, although he referred to it as a 'very delayed first step' by European countries. He also stated that 'we are ready for constructive engagement with Europe on equal terms and mutual respect.' Abbas Araqchi, Iran's deputy foreign minister, who is in Bucharest, also reacted to the EU's decision earlier and referred to INSTEX as 'the first step in a series of commitments' that 'Europeans have committed to Iran.' He expressed hope that this mechanism would be 'fully established and not incomplete.' According to Mehr News Agency, Mr. Araqchi added: The aim of this mechanism is to ensure that all of Iran's receipts and payments with Europe, meaning our exports and imports, are included in this financial mechanism and that exchanges between the two sides occur through this mechanism. The establishment of this mechanism came after the US withdrew from the JCPOA on May 8 of this year and reinstated the suspended sanctions against Iran. Previously, an unnamed senior US official had told the Associated Press that Washington would fully enforce its sanctions against Iran and would confront anyone or any entity that undermines these sanctions. According to the Associated Press, the White House warned Europeans about the registration and launch of the financial channel, stating that if they attempt to circumvent sanctions against Iran, they would face 'heavy penalties and sanctions.'