INSTEX: A Facilitator for Trade with Iran or Just a Symbolic Move?

"INSTEX" (Instrument in Support of Trade Exchanges) is a newly established entity by Germany, France, and the UK aimed at mitigating the impact of U.S. sanctions against Iran. INSTEX is a financial channel and a special mechanism for transferring money that is intended to enable Iran to continue its exchanges with European companies despite U.S. pressure. According to European parties, INSTEX will initially be used only for the sale of food, medicine, and medical equipment to Iran, but there is potential for its scope to expand in the future. INSTEX is essentially the EU's special purpose vehicle (SPV) that has taken on a new form and name. The INSTEX entity will be registered in France and headquartered in Paris, but it will be managed by Germany, with financing provided by all three countries. INSTEX was registered as a company in Paris on Wednesday with a capital of 3,000 euros, and its supervisory board includes members from France and Germany, chaired by Per Fischer, a former manager at Germany's Commerzbank. Although this new entity is a project of the three mentioned governments, it will also receive official approval from all 28 EU member states. Iran agreed to the JCPOA to alleviate the pressure of previous sanctions against it, and the European parties to the JCPOA are trying to ensure that the concessions made by the Islamic Republic in the agreement are not lost. The original European plan was for Iran to engage in barter trade in exchange for selling its oil to Europe and receiving European goods. However, now that Europe is buying very little oil from Iran due to U.S. sanctions, the new channel will primarily benefit small and medium-sized enterprises. An European diplomat stated that INSTEX "will not bring about significant change but carries an important political message to Iran that we are determined to preserve the JCPOA." On Thursday, AFP reported that Didier Reynders, Belgium's foreign minister, emphasized upon arriving in Bucharest for a European meeting that U.S. pressures have made trade with the Islamic Republic risky and added that "in the end, it is the companies themselves that must decide whether they want to work with Iran or not." The U.S. government has always reacted negatively to the establishment of a European financial channel for Iran, and in its latest warnings, a senior U.S. official, who wished to remain anonymous, seriously warned that those circumventing sanctions against Iran would face heavy penalties. Republican Senator Tom Cotton has also recently stated that Europeans "must choose between doing business with Iran or with the United States." The establishment of this financial channel took months, and Reuters reports that its operationalization is likely to take several more months. An unnamed European diplomat told Reuters that INSTEX "will not bring about significant change but carries an important political message to Iran that we are determined to preserve the JCPOA." Rob Malley, a former Middle East director at the U.S. National Security Council, told Reuters that INSTEX is a "symbolic political move" that could encourage Iran to remain in the JCPOA.