Mostafa Beheshti Rouy
Executive Board Member, Bank Pasargad
The Instrument in Support of Trade Exchanges (INSTEX) was established in January 2019 by Europeans as a SPV to facilitate legitimate trade with Iran and circumvent the unilateral US Sanctions. But it was not until 14 months after INSTEX was founded that the first and to date only known transaction through the company took place in March 2020. This mechanism has failed. And today political discussions have been heated up once again. Although the reason of this failure is merely technical, as we have been emphasizing since the beginning.
The major problem of INSTEX is the lacking settlement role and power and the need for some kind of bridge financing. INSTEX, under existing structure, is not capable of doing any of the two mentioned roles or handling trade financing between Iran and Europe. With the current structure INSTEX cannot be a solution to Iran’s problem.
The vehicle for this purpose should be a financial Institution capable of settling the payments, and if Europe is serious enough in their gesture to keep JCPOA alive and intends to cooperate with Iran, and also considering the ownership structure of INSTEX and the nature of transactions being involved, Europe can easily issue a banking license to INSTEX for this purpose and enable them to carry on a positive role under complete control and supervision of the EU Authorities.
To this end, we shall push for transforming INSTEX to a financial institution, and the existing Iranian banks network in Europe can provide and assist for the Bridge Financing.
Unfortunately, we have lost precious time not paying attention to the core incompetency of INSTEX and deficiencies arising out of its existing structure, but I hope we catch up and compensate the elapsed time by concentrating on the workable solution of Financial Institution role for INSTEX.
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the position of AIBE.