INSTEX's Long-Term Benefits Outweigh Current Shortfalls

EghtesadOnline: The new EU-Iran trading mechanism should be given a chance to work because its long-term benefits both in the fields of economy and politics outweigh its current shortcomings, a former diplomat said.

News ID: ۷۴۷۷۹۳

07 July 2019

Iranian authorities should adopt a "strategic" stance toward INSTEX, or the Instrument in Support of Trade Exchanges, as the country's interests do not lie in the unraveling of the 2015 nuclear deal, Nosratollah Tajik also told ISNA in a recent interview.

At a recent meeting in Vienna, Austria, the European Union announced that the special purpose vehicle for non-dollar trade with Iran—designed to circumvent US sanctions and keep the nuclear accord alive—had become operational and the first transaction is being completed.

Tehran said some of the steps announced by France, Britain and Germany, including the involvement of seven other EU states in INSTEX and the provision of a credit line, were positive but not sufficient, according to Financial Tribune.

Iran has been pressing Europe to use INSTEX to establish larger credit lines to finance Iranian oil exports to Europe and offset US President Donald Trump's decision last year to abandon the agreement, officially called the Joint Comprehensive Plan of Action.

At present, the arrangement is confined solely to easing trade in humanitarian goods that are, in fact, not subject to US sanctions, such as food and medicine.

Incentive-Based Approach

Tajik, a former ambassador to Jordan and an expert on international affairs, said he does not maintain that Iran should unilaterally implement a multinational agreement.

"But I believe we should take the next steps with an incentive-based approach rather than cutting our ties with Europe and prompting them to align themselves with Trump," he said.

Iran has said it would increase uranium enrichment purity level above the 3.67% limit set in the deal, possibly as soon as July 8, if the remaining signatories fail to shield its economy from US sanctions.

"We have to propose solutions to the Europeans that could both strengthen their political will to save the JCPOA and help Iran receive more economic benefits," he said.

Tajik stressed that the political implications of INSTEX are as important as the economic openings it can offer.

"We should turn INSTEX into an opportunity for the country to interact with Europe and the world," he said, adding that Iran should give the European trade channel a chance and time to work.

"Strengthening this mechanism at the cost of further compromise with Europe, in addition to involving China, Russia, Japan, India, etc. as emerging economies influencing the global trade balance, could mark a milestone."

If INSTEX is revised and strengthened in light of such an approach, Iran could become a "hub for non-dollar transactions in West Asia" in the future, the former official said.

Tajik noted that Iran has made itself "vulnerable" by tying people's livelihood to oil sales, adding that many issues facing the country are rooted in domestic mismanagement, flawed economic policies and heavy reliance on oil.