Iran Envoy to UK: Punishing STFI Can Kill INSTEX

EghtesadOnline: Iran’s ambassador to London, Hamid Baeidinejad, said US threats to sanction Iran’s reciprocal trade entity to Europe’s Instrument in Support of Trade Exchange could put an end to INSTEX, and by extension to whatever is left of European diplomacy vis-à-vis the Iran nuclear agreement.

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12 June 2019

“These sanctions will practically terminate INSTEX and hurl  EU diplomacy towards total failure,” Baeidinejad wrote in a twitter post Monday.

He was referring to a Bloomberg report Monday that the Trump administration is weighing sanctions against the Iranian trade mechanism, known as Special Trade and Finance Institute, set up as a go-between for trade with Europe.

Citing a senior administration official who asked not to be identified, Bloomberg said the US measures would target STFI, which Iran set up as counterpart to the European INSTEX, according to Financial Tribune.

The official claimed the STFI is essentially an extension of the Central Bank of Iran, which already is under US sanctions, and according to the administration, hasn’t implemented minimum global safeguards against money laundering and terrorism financing.

According to news outlets, the latest US move is likely to put an end to the economic and humanitarian lifeline that France, Germany and the U.K. have sought to create for Tehran.

Earlier on Monday, German Foreign Minister Heiko Maas said that the three European countries are determined to support the JCPOA.

“We try to set up and run the INSTEX in the form of three European countries and beyond.”

Maas held talks with President Hassan Rouhani and his Iranian counterpart Mohammed Javad Zarif, as part of a concerted European effort to preserve the unraveling nuclear agreement and defuse rising US-Iran tensions.

Part of EU Mechanism

Punishing the STFI could doom INSTEX because it raises the possibility of sanctions risk to anyone who’s a part of the European mechanism.

European countries established INSTEX in January to help shield limited trade with Iran from US sanctions imposed after President Donald Trump withdrew from the multinational Iran nuclear deal a year ago.

The new sanctions, if they take effect fully, would probably derail faltering European efforts to sustain some trade with Iran by avoiding the use of US dollars or the American financial system.

“If they are looking at sanctioning STFI, you’re essentially trying to kill INSTEX through the back door,” said Ellie Geranmayeh, a senior policy fellow at the European Council on Foreign Relations, referring to the Iranian body.

“If the U.S. were to take action that kills INSTEX on arrival, my sense is there will be even more political backing in Europe to oppose the U.S.”

“Now, all be informed that the US policy of economic terrorism is the biggest threat against JCPOA,” Baeidinejad wrote.

In a tacit acknowledgment of the effectiveness of US sanctions, European nations have significantly scaled back their ambition for the mechanism, saying trade through it would be limited only to transactions covering humanitarian goods.

US sanctions against Iran already include carve-outs for humanitarian transactions. But European nations argue that INSTEX is needed to provide European companies and banks stronger assurances that they won’t be hit by US sanctions even if they limit themselves to humanitarian purpose

While the INSTEX mechanism is relatively obscure and would probably be used in limited cases, its opponents say that letting it survive could create a powerful economic tool later that could deal a blow to the effectiveness of US sanctions more broadly.

One possibility is that European powers could use INSTEX for a wider range of trade with Iran, even as sanctions remain in place.

Another possibility is that other nations, including American adversaries, could use INSTEX as a model in the future and avoid the US financial system entirely.

European officials say that establishing INSTEX is imperative to keep Iran abiding by the nuclear deal.