France Says E3 Moving INSTEX Forward

In response to the US decision to eliminate waivers on Iran oil sanctions, the French Ministry of Europe and Foreign Affairs announced in a notice that despite the move, the European finical mechanism is in progress and will be put into operation in the near future.  
“The work initiated is progressing in a positive manner with a view toward ensuring its successful conclusion in the near future” the ministry said. 
The financial mechanism known as INSTEX (Instrument in Support of Trade Exchanges) is aimed at facilitating trade with Iran by circumventing sanctions reimposed by the United States after it pulled out of the 2015 nuclear deal, officially known as the Joint Comprehensive Plan of Action (JCPOA), last year. 
The notice, published in the ministry’s official website, adds that France is determined to implement JCPOA, which was unanimously endorsed by the UN Security Council in its resolution 2231 (2015). 
“Together with its European partners, France intends to continue its efforts to ensure that Iran reaps the economic benefits associated with the lifting of sanctions as long as it continues to honor all of its nuclear obligations”, the notice read. 
US secretary of state, Mike Pompeo, said Monday that the administration will no longer exempt Iranian oil importers from sanctions.   
France, Germany and the United Kingdom (E3) established the INSTEX financial compensation mechanism to facilitate financial transactions for European firms that wish to maintain trade relations with Iran in accordance with European and international law. 

Pooling Minds

“In-depth discussions with French, British and German experts are underway, in conjunction with Iranian experts, in order to ensure that the two structures operate in a way that is compatible and in conformity with international financial standards,” the ministry said. 
The ministry emphasized that Iran must also make progress on the work to make its mirror-image version of the mechanism operational. 
According to media reports, INSTEX will be based in Paris and managed by German banking expert Per Fischer who is also a former Commerzbank manager. The UK will head the supervisory board. 
Fischer visited Iran in March to met authorities and representatives from France, Germany, Britain, and the EU on how to best implement the payment channel. During his visit he also held talks with senior banking officials on the structure of the corresponding INSTEX entity in Iran.       
A few days after his visit, Iran announced that is has created the INSTEX mirror entity. 

“Netting Basis” 

In a recent talk with the Financial Tribune, the UK trade commissioner to Middle East, Afghanistan and Pakistan Simon Penney said INSTEX will operate "simplistically on a netting basis" so the idea is to minimize the flow of physical cash or money across the border in and out of Iran and is predicated on having equal debits and credits on both sides.  
The instrument is aimed at enabling legitimate trade between Iran and the European Union in the first phase before expanding to cover third parties as well. 
Given the small level of trade between Iran and the EU, the second phase of the project that would link the country to the world is of greater importance for Tehran. 
France is one of three European countries involved in setting up the financial mechanism to facilitate trade with Iran as a move to compensate for some of the losses incurred by the sanctions.  INSTEX is also in line with Europe’s attempt to convince Iran not to quit the nuclear deal. 

Foreign Minister Mohammed Javad Zarif criticized E3 leaders last week for prolonged delays in putting the long-awaited European mechanism into operation.   
“The mechanism corresponding with INSTEX was launched in Iran last week and now Europeans have no excuse for [refusing to] fulfill their commitments and begin the operation [of the instrument] “he said.