The EU has set no preconditions on implementing the Special Purpose Vehicle that the EU has set up for Iran known as INSTEX, the UK ambassador in Iran said.
In a talk with the Financial Tribune on Wednesday, Ambassador Rob Macaire said the EU is setting up INSTEX as part of its commitment under the JCPOA –the nuclear deal Iran signed with the six world powers in 2015, which US President Donald Trump abandoned in the summer of last year.
"There are no strings attached and no hidden deals…The instrument is exactly what it says and the purpose and aspirations of the entity are transparent," Macaire said.
"The reason why we have set this up is part of our commitment under the JCPOA to ensure that we make every effort to enable legitimate trade to continue…with Iran.”
Europe on Jan. 31 unveiled its long-delayed mechanism for facilitating trade with Iran by circumventing US global financial domination.
"There is, of course, the relationship with international banking standards. In that sense, there are standards linked to FATF but it is not a precondition of any sort," Macaire noted.
The diplomat said the decision is for Iran whether it wants to comply with FATF.
Macaire said the EU very much hopes that Iran would in fact end up compliant with FATF standards lest "the work we have put into INSTEX may be wasted."
"It's really important to explain that we are making no preconditions on INSTEX, but we want Iran to be able to engage internationally and to do this they need to be in compliance with international standards," the envoy said in the interview.
As explained by Macaire, the UK is one of the three shareholders of the INSTEX which is a private entity but has governments as shareholders.
Delays
About the delays facing the launch of the SPV, Macaire said it was due to the rarity of the body being set up.
"It is something that hadn't been done before, so it is an unprecedented project and there have been quite a lot of complexities: legal, political, technical and we had to deal with all of those to get to this stage. That took a bit of time," he said.
Becoming Operational
About putting INSTEX into operation, Macaire said the initial capital put up by the three governments is the legal requirement for establishing the company.
However, he said it's too early to say what the model is going to look like in practice because there are a number of ways this can operate.
Rob Macaire: We have always said INSTEX is an institution that will evolve in phases. So there would be the initial phase, getting to the technical creation and then to operationalize it
“We could say that there is initial funding and then there are a number of different routes we can take for operationalizing. My colleagues in London, Paris and Berlin are in touch with European banks."
He said INSTEX does not replace banks, it is complementary to the banking system.
About the possibilities of financing INSTEX, Macaire said it is a bit early to give a definitive answer because "as we have always said this is an institution that will evolve in phases. So there would be the initial phase, getting to the technical creation of the organization and then to operationalize it."
"In each stage there needs to be decisions taken about where we go next. The aim is to extend it beyond the E3 countries to other EU countries, potentially to other countries outside the EU and to evolve the organization in phases as we go."
Time Line
As for a date for INSTEX to become operational, the ambassador said it was difficult to predict a timeline.
"One of the first things that needs to happen is for Iran to create its counterpart organization and we're working very closely with Iranian colleagues on the technical details of that. It's not possible to give an exact timing for operationalizing INSTEX. But obviously we have to be as quick as possible and it's a very very high priority for us," he said.
Experts in London and other capitals are working hard on a full time basis trying to make this vehicle work, he said.
US Sanctions
Europe has been very clear, he added, that this is an institution that is devised to support legitimate trade with Iran and the EU does not recognize the new US sanctions.
"INSTEX is focused on legitimate trade with Iran and that is part of our commitment to the JCPOA. So our position on that is very clear.
Of course there companies that are deterred from doing business with Iran because of the US sanctions and this initiative will not change their view to persuade them to trade with Iran.”
On the same wavelength, he says “There are a host of companies that want to trade with Iran but are unable because of the restrictions on banking channels and this initiative is really about trying to deal with that problem… to enable and encourage companies who want to trade with Iran to be able to do so."
He said the priority is to work with sectors that are most important to the population of Iran – food, agricultural products and pharmaceuticals.
"That is where the organization will start but the plan as I said is to evolve it in phases to move on from that phase to other phases. What we will not do is make predictions at this stage on how it's going to go because it will depend on what we learn about how it works and depends on a whole number of circumstances. We can't necessarily predict things, at this stage the intention is certainly to move broader in terms of the participation in INSTEX and in the sectors covered."
Many countries have "talked to us about the opportunities that INSTEX would give them and their companies. But there certainly are other European Union countries that are very interested in joining the countries involved.”
Steering clear of the high hopes and systemic criticism of the special vehicle by opponents in and outside Iran, Macaire said, "[INSTEX] will not solve all of Iran's problems and we never claimed it will. But as long as we work with Iran on operationalizing INSTEX and the counterpart organization, I have faith that it will be a success.
