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TEHRAN, Mar 05 - A European delegation will visit Tehran in the coming days to discuss the operation of a new channel for non-dollar trade which the bloc has set up to continue business with Iran and circumvent US sanctions.
TEHRAN, Young Journalists Club (YJC) - The European Union established the Instrument in Support of Trade Exchanges (INSTEX) in February, but conditioned its operation to Iran's ratification of the Financial Action Task Force (FATF) on money laundering and financing terrorism.
While Iran has ratified its own money laundering and anti-terrorism laws, it has reservations about joining the FATF which critics believe could compromise the country’s security.
According to Iran’s Foreign Ministry spokesman Bahram Qassemi, a European delegation of economic and technical experts will visit Tehran in the “near future” for talks with Iranian authorities.
Qassemi said the launch of INSTEX was the first step and that experts from the two sides were about to discuss issues related to its implementation.
The Europeans have insisted that INSTEX would initially focus on such sectors as pharmaceuticals, medical devices, and foodstuff, excluding oil and other trade.
That gravely falls short of Iran’s expectations, which have already been undermined by Europe’s intentional foot-dragging to have the payment system up and running.
On Monday, it was reported that Leader of the Islamic Revolution Ayatollah Seyyed Ali Khamenei had forecast European lack of seriousness to protect trade with Iran from US sanctions in mid-2018.
In a closed-door meeting with President Hassan Rouhani’s cabinet, Ayatollah Khamenei said the 2015 nuclear deal did not resolve "any of the economic problems” and predicted that the new European mechanism would likewise be ineffective.
The Europeans, the Leader said, would naturally say they are protecting Iranian interests with their package but the Iranian government "should not make this a main issue.”
Senior Iranian negotiator Abbas Araqchi on Monday urged Europe to “take practical measures and pay the price” to salvage the nuclear deal, officially known as the Joint Comprehensive Plan of Action (JCPOA).
Araqchi told Philipp Ackermann, acting director of the German Foreign Ministry's political section, that INSTEX was only one of the commitments that the Europeans have undertaken under the JCPOA.
“The European side is expected to make more serious efforts toward practical and tangible results of the JCPOA and for the immediate implementation of INSTEX,” he told Ackermann in Tehran.
Araqchi also deplored Germany’s decision to ban flights in and out of the country by Iran’s Mahan Air, which is under US sanctions.
In December, the daily Bild said the German government had decided to stop Mahan Air from operating its flights to Dusseldorf and Munich after intensive deliberations on US demands.
Ackermann, nevertheless, hailed the JCPOA and said German companies were more willing to work with Iran after the establishment of INSTEX.
INSTEX is registered in France and will be headed by German banker Per Fischer, a former Commerzbank director, while Britain will head the supervisory board.
The three countries are shareholders in INSTEX and hope other European states will join later. They must now establish a budget for INSTEX and define its rules.
The Europeans were initially supposed to set up a Special Purpose Vehicle (SPV) to help use Iranian oil and gas exports for purchases of EU goods. However, they scaled it down to include smaller trade of humanitarian products or food.
Even for a faded INSTEX, the EU dragged its feet until November when the United States completed its imposition of two rounds of sanctions on the Islamic Republic.
Observers say the EU has spent months preparing the system and it will take several months more to become operational.
“It won’t change things dramatically, but it’s an important political message to Iran to show that we are determined to save the JCPOA and also to the United States to show we defend our interests despite their extraterritorial sanctions,” one European diplomat said last month after the channel was set up.
New US sanctions have largely persuaded European companies to abandon business with Iran, with Washington saying it did not expect the EU effort to change that.
SMEs moving in to fill the void
EU officials, however, expect small and medium-sized enterprises (SMEs) to fill the void.
According to Michael Tockuss of the German-Iranian Chambers of Commerce and Industry, SMEs or Mittelstand provided most of German exports of 400 million euros to Iran in October 2018, a rise of 85 percent year-on-year.
German reports say around 1,000 Mittelstand companies have business ties to Iran and 130 have set up branches in the country.
However, EU exports to Iran fell 17.6 percent to 8.9 billion euros in 2018 which also saw European imports from Iran decline 4 percent year-on-year to 9.72 billion euros, the European Commission’s official figures showed.
Iran’s exports to the EU started to plummet in mid-2018 as most European clients stopped buying oil from Iran. Oil and petroleum products constitute about 90 percent of Iran’s total exports to the EU.
Last month, Iran’s Minister of Petroleum Bijan Zangeneh complained that the Europeans were refusing to resume Iranian oil imports despite having received exemptions from US sanctions.
"No European country is buying oil from Iran except Turkey,” he told a news conference in Tehran.
Instead, Asian customers of Iranian oil are steady in taking supplies from the country.
In 2018, Iran’s exports to India rose to $14.787 billion from $11.1 billion in 2017. Iranian imports from India also grew 9.8 percent to $2.86 billion.
China is currently Iran’s largest trade partner with a turnover of $8.3 billion, head of the Islamic Republic of Iran Customs Administration Mehdi Mir-Ashrafi was quoted as saying Tuesday. Iraq is the second with $8.2 billion, he added.
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