The Central Bank of Iran blamed European governments’ party to the landmark 2015 Iran nuclear deal for the failure of the EU trade mechanism known as the Instrument in Support of Trade Exchange (INSTEX).
In a note posted in its official twitter account, the CBI said non-performance of the payment mechanism was largely because the Europeans didn’t have "enough courage to exercise their economic sovereignty".
INSTEX was designed in January 2019 to evade the hostile US sanctions and facilitate trade between Iran and the European Union, and possibly other third parties, to save the nuclear agreement.
The outgoing United States government under Donald Trump withdrew from a six-power nuclear deal in 2018 and imposed tough economic sanctions that over time became more like a blockade.
"INSTEX was set up to save JCPOA, but it did not work because the European countries did not have the courage to uphold their economic sovereignty," the CBI said, referring to the official name of the nuclear accord (Joint Comprehensive Plan of Action).
"Furthermore they had no idea how the channel should be financed. Iran will not shift its resources to INSTEX just to keep it and import the same goods that are already available from other channels. INSTEX should have facilitated trade beyond the US sanctions not under it.”
The censure was in response to statements by a German Foreign Ministry official on Sunday, who claimed Iran was responsible for the failure.
"A big number of European companies expressed willingness for commercial cooperation with Iran and joined negotiations with Iranian parties but Iran didn’t agree with any of the deals," DW reported the official in Berlin as saying.
One Transaction!
Almost two years after inception INSTEX has remained largely on paper with only one transaction. In March 2020 Germany’s Foreign Ministry said France, Germany and the UK processed their first deal with Iran to supply medical supplies using INSTEX.
After long delays the first transaction involved export of medicine worth €500,000 by a private firm in Germany to a company in Tehran.
Sascha Lohmann of the German Institute for International and Security Affairs (SWP) believes that the inefficiency of the trade mechanism is due to lack of political will of the involved parties. He argues that "one can conclude from this that [the trade mechanism] does not have sufficient backing from high-ranking political figures."
This could well be the result of US displeasure despite the fact that the mechanism in essence was designed for the exchange of humanitarian goods.
Although medicine and other humanitarian goods are exempt from the US restrictions, banking restrictions and threats of secondary sanctions have severely hampered the supply of critical goods because foreign firms, fearing US wrath, exercise extra caution and prefer not to do business with Iran.
In the same vein, Ellie Geranmayeh, an expert on Iran with the European Council on Foreign Relations, argues that it became clear by last summer that INSTEX was more of a political and symbolic gesture rather than a genuine economic initiative.
