Three European countries – France, Germany, and the UK (officially shortened as E3) – have officially announced the creation of INSTEX, a special purpose vehicle (SPV) to allow them to bypass US sanctions on trade with Iran.
What is the new SPV?
The Blocking Statute “allows EU economic operators to recover damages linked to the application of US extra-territorial sanctions, nullifies the effect in the EU of any foreign decision based on these sanctions, and prohibits EU persons from complying with the US extra-territorial sanctions, unless there is explicit authorisation from the Commission to do so”.
UK Foreign Minister Jeremy Hunt called INSTEX “a clear, practical demonstration that [European nations] remain firmly committed to the historic 2015 nuclear deal struck with Iran, the Joint Comprehensive Plan of Action, for as long as Iran keeps implementing it fully”.INSTEX’s headquarters will be located in Paris under German governance, according to a report by Deutsche Welle. The Paris companies register says INSTEX will be located in France’s Finance Ministry building.
The SPV will be headed by German national Per Fischer, a former Commerzbank director, according to Iranian news agency IRNA.
The supervisory board will be comprised of three diplomats: Miguel Berger of Germany, Maurice Gourdault-Montagne of France, and Simon McDonald of Britain, CNBC reports.
According to earlier reports, the SPV will act as a barter trade arrangement between the EU and Iran, with some form of virtual “credits” implemented as currency.
Iranian Deputy Foreign Minister Abbas Araghchi also confirmed that for the trade scheme to work, Iran must establish a mirror company of its own, according to Reuters.It is unclear when the trade transactions via the SPV would start. The technicalities are expected to take several more months to be worked out, Reuters says.
While initially the SPV was established to protect EU companies from US sanctions, the official statement says third-party countries will also be allowed access to the system.
“INSTEX aims in the long term to be open to economic operators from third countries who wish to trade with Iran and the E3 continue to explore how to achieve this objective”.
The official statement explicitly admits it is unclear how exactly third parties will be allowed access, but this technicality is expected to be solved soon.
The new system will comply with all EU/UN standards of trade, including measures against money laundering and terrorism support, the official statement says.
Russia, China, the US and many EU nations are members of this organisation.
On 31 January, a US State Department spokesperson also reiterated that “entities that continue to engage in sanctionable activity involving Iran risk severe consequences that could include losing access to the US financial system and the ability to do business with the United States or US companies”.
The US State Department said it was “closely following” reports on the European mechanism for details about exactly what would be involved.Earlier in January, an unnamed senior US administration official warned that Washington would slap fines and penalties on the EU should it try to circumvent sanctions against Iran.
The US will fully enforce its anti-Iranian sanctions and “hold anyone accountable for undermining them”, the official said.