INSTEX Operation Linked to Abiding by FATF Rules, Setting Up Mirror Entity

EghtesadOnline: The European mechanism to facilitate trade with Iran will not work until Tehran sets up a mirror company and meets international standards against money-laundering and terrorism financing, a French diplomatic source said.

News ID: ۷۸۴۸۴۹

07 September 2019

“The Iranian mirror structure is not operational. The day they have signed the necessary FATF (Financial Action Task Force) conditions we’ll talk about it and the day that we are sure that the first transactions through INSTEX [Instrument in Support of Trade Exchange] aren’t put under American sanctions, (then) we’ll talk about it again,” the unidentified diplomatic source told Reuters.

France’s foreign minister said on Tuesday the mirror company had not been set up. This is while Iran has repeatedly insisted that the mirror entity to correspond to INSTEX is up and running, putting the blame on Europeans for repetitive delays in the mechanism becoming operational.

The Central Bank of Iran announced in March it had registered a mirror company, officially known as Special Trade and Finance Instrument, to operate in coordination with INSTEX, Financial Tribune reported.

In July, Ali Asghar Nouri, head of Iran’s STFI for trade with Europe, denied that Tehran was responsible for delays in getting INSTEX up and running.

Britain, France and Germany (E3), three European countries party to a 2015 nuclear deal with Iran, 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.

launching INSTEX  was part of E3 attempts to show they can compensate for the Iran’s lost economic interests enshrined in the nuclear deal after the US left it.

Differing Versions

INSTEX would initially only deal with food and medical trade not Iran’s principal export - crude oil. This is while Iranian officials have repeatedly said INSTEX must include oil sales or provide substantial credit facilities for it to be beneficial.

French President Emmanuel Macron is trying to clinch a $15 billion credit line that would offset tough US sanctions that have strangled Iran’s oil exports, but that requires getting some backing from Washington.

But the clock is ticking for EU to salvage the deal. President Hassan Rouhani on Wednesday gave Europe another two months to save the deal.

Iran has informed the EU that it will begin unlimited nuclear research and development work from Friday, officially unleashing the third stage of its measured responses to Europe's lack of action in the face of America's violation of the 2015 nuclear deal.

European officials until now have said that conforming to Paris-based FATF rules was not a prerequisite for INSTEX, although it would facilitate its establishment.

Iran’s parliament has approved some new measures against funding terrorism under pressure to adopt international standards. But the Guardian Council, which vets laws and elections for compliance with Iran’s Constitution, blocked a draft law in 2018.

The FATF said in June that it could only consider fully enacted legislation and gave Iran until October to meet its norms or face greater scrutiny of international financial transactions with Tehran.