INSTEX – INSTRUMENT IN SUPPORT OF TRADE EXCHANGES
03, Dec 2019
Prelims level : International Institutions – Summits, Working, Organisations Mains level : GS-II Bilateral, Regional and Global Groupings
Why in News?
- Six new Countries – Belgium, Denmark, Finland, the Netherlands, Norway and Sweden have recently joined INSTEX.
- It was initially set up by Germany, France and Britain (E3) to facilitate non-dollar trade with Iran.
What is INSTEX?
- It is a payment mechanism being setup by the European Union to secure trade with Iran and skirt US sanctions after Washington pulled out of the landmark nuclear deal recently.
- Recent U.S. sanctions halted a significant portion of trade between Iran and its European partners. The above move will allow the European Union to circumvent U.S. sanctions in an effort to continue humanitarian trade with Iran.
- It is registered at Paris with an initial 3,000 Euros in the capital and a supervisory board with members from France and Germany and chaired by the UK.
- It is a project of the governments of France, Germany and Britain and will receive the formal endorsement of all 28 EU members.
Significance of the Move:
- It will support legitimate European trade with Iran, focusing initially on the sectors most essential to the Iranian population – such as pharmaceutical, medical devices and agri-food goods.
- It aims in the long term to be open to economic operators from third countries who wish to trade with Iran and the E3 continue to explore how to achieve this objective.
- It will function under the highest international standards with regards to anti-money laundering, combating the financing of terrorism (AML/CFT) and EU and UN sanctions compliance. In this respect, the E3 expect Iran to swiftly implement all elements of its FATF action plan.
- This mechanism is the first concrete step by the EU to counter Trump’s unilateral decision to withdraw from the Nuclear Deal.
- The launching of INSTEX is not only a matter of Iran-EU relations but also embodies a new approach by the bloc towards US policies.
- It “becomes an opportunity when it’s understood as an experiment and as part of a bigger project to strengthen EU economic power.
How has the US Reacted?
- It has warned EU that any attempt to evade its “maximum pressure” campaign on Iran would be subject to stiff penalties.
About “The Joint Comprehensive Plan of Action” (JCPOA):
- It is a detailed agreement with five annexes reached by Iran and the P5+1 (China France, Germany, Russia, the United Kingdom, and the United States) in July 2015.
- The nuclear deal was endorsed by UN Security Council Resolution 2231, adopted on July 20, 2015.
- Iran’s compliance with the nuclear-related provisions of the JCPOA will be verified by the International Atomic Energy Agency (IAEA) according to certain requirements set forth in the agreement.
- Recently, President Trump announced that the United States would withdraw from the JCPOA and reinstate U.S. nuclear sanctions on the Iranian regime and subsequently did the same.