July 08, 2019
Instex, forever around the corner?
Perhaps the most surprising claim in this story by Politico (US edition) on the standoff between the US and Iran is that the Trump administration actually hopes for Instex, the European special purpose vehicle to facilitate trade with Iran, to work. If there is a method to Donald Trump's diplomatic madness it seems to be to tear up agreements to force other parties to come begging for a renegotiation. As in other cases, Trump has claimed that the JCPOA treaty negotiated by the Obama administration was a bad deal and he will get a better one. In that context there is some logic to the idea that Instex, by facilitating trade in non-sanctioned goods without using sanctioned financial channels, would keep the Iranians just this side of breaking their nuclear commitments altogether. But it is still a shock to see a - however unnamed - US official claim that the US wants Instex to work when other officials are on the record warning that it could never work without falling afoul of regulations against money laundering or terrorism financing. US treasury officials have insinuated the US could designate Instex' necessary Iranian counterpart as a target for sanctions due to its ties to the Iranian revolutionary guard.
If that is the strategy of the Trump administration, it doesn't seem to be working. This weekend Iran announced that it is going one step further in its breach of the nuclear deal. In addition to exceeding the allowed size of its enriched uranium stockpile last week, starting this weekend Iran is claiming that it will enrich uranium beyond the allowed grade. Iran is not impressed by the fact that Instex, for all the Europeans' promises, isn't more than just a claim without any actual transactions to show for it. Kamal Kharrazi, chairman of Iran's strategic council of foreign relations, is quoted by the Tehran times as saying that a credit line worth millions of euros, given to Instex by its state sponsors the E3 (Britain, France and Germany), is not enough to make Instex useful. Iranian officials also insist that, if it doesn't facilitate oil exports, Instex will not be enough for Iran. But oil is subject to US sanctions and the E3 intend for Instex to facilitate trade in non-sanctioned goods only.
Kharrazi is also unimpressed by Bruno Le Maire, France's finance minister, who said Instex would carry out its first transaction within days. After all, it's been over a week since the E3 told a JCPOA oversight committee that Instex' first transactions were being processed. Every week or two some E3 official claims that the first Instex transation will happen in a couple of weeks. In that respect Instex seems to be like nuclear fusion, forever around the corner but forever out of reach. Nevertheless, for all its scepticism, Iran also claims that its own mirror institution to Instex - called STFI, or Satma in Farsi - is operational and has invited Iranian exporters to use it.
While Le Maire provides assurances that Instex will be working any day now, Emmanuel Macron has become involved in the diplomatic effort. In a phone call with Hassan Rouhani, Iran's president, Macron warned of the consequences of Iran breaching its uranium enrichment limits. But both leaders also agreed to explore between now and July 15 the conditions for renewed talks on the Iran deal.