Europe’s financial mechanism to facilitate non-dollar trade with Iran amid American sanctions has not envisioned a system for ensuring Iran’s oil export, the lifeblood of its economy, which is “an issue that cannot be overlooked”, a lawmaker said.
“Under sanctions imposed on Iran, oil sales are of high importance to the country, therefore, focusing on this feature in INSTEX [Instrument in Support of Trade Exchanges] is essential,” Heshmatollah Falahatpisheh, chairman of Majlis National Security and Foreign Policy Commission, said in a talk to ICANA.
INSTEX is the name of a financial channel that Europe has designed to enable trade with Iran after the United States unilaterally withdrew from the 2015 nuclear agreement last year and reimposed the sanctions lifted under the deal.
The instrument was recently registered by E3 (France, Germany and Britain) after months of delay, but is yet to become activated.
It is set to work for essential goods, including food and medicine, with European states in the first phase before opening up to third countries and incorporating other goods.
Funding Issue
With no European country currently buying oil from Iran, according to Oil Minister Bijan Namdar Zanganeh, the question is how Iran would be able to fund the mechanism in return for the said goods.
Iran’s economy is highly dependent on its oil income, without which its foreign exchange earnings from other international trade would be hardly sufficient to finance the import of goods required to meet domestic needs.
The US sanctions have targeted not only the oil sector, but also the banking system that would disable oil-related transactions.
INSTEX is expected to counter the effects of these restrictions and prepare the ground for continued crude exports.
However, the two major European clients of Iranian oil, namely Greece and Italy, have already stopped their purchases completely despite Washington’s waivers, raising criticism by officials in Tehran.
Zanganeh has censured the two countries for not offering any explanation for their decision.
“They don’t buy Iranian oil and they don’t answer our questions,” he said.
In spite of this shortcoming, Iran has chosen to allow Europe to gradually perfect its mechanism.
“The main point of acting along this line for Iran is to increase its negotiating power and expand its economic ties with Europe,” Falahatpisheh said, hoping that Russia and China would soon begin to use Europe’s trade instrument.
In addition to Greece and Italy, the US has granted waivers to six other countries, namely Turkey, China, India, Japan, South Korea and Taiwan, to continue buying oil from Iran, but at a ceiling almost half their pre-sanctions purchases.
Tehran is also hoping that these countries would increase their imports to the previous levels, once they join INSTEX.
