The recent news of Belgium, Denmark, Finland, the Netherlands, Norway, and Sweden joining the Instrument in Support of Trade Exchanges (INSTEX) has created ripples in the international trade arena. This development brings the total number of nations involved in INSTEX to nine. These are mostly European nations, which has instigated a fresh perspective on their relations with Iran.
Understanding INSTEX
Established in January 2019 by France, Germany, and the United Kingdom, INSTEX is a trade mechanism that allows entities within these countries to continue their trade associations with Iran. It was primarily designed to keep trade channels open despite the imposition of US sanctions against trade with Iran.
In an innovative approach, this mechanism bypasses the use of the U.S. Dollar, thus skirting U.S. sanctions. The sanctions were imposed after the United States withdrew from the Iran nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA), back in 2018.
How does INSTEX Function?
Based in Paris, INSTEX functions as a clearing house. It enables Iran to conduct its oil business and import other goods or services in exchange. Under INSTEX, the participating countries transfer funds through the mechanism, which circumvents the need for direct financial transactions with Iran and the risk of contravening US sanctions.
Essentially, companies in Europe send money to the corresponding companies in Iran through this mechanism, thereby avoiding any requirement for direct monetary transactions. This way, they are not at the mercy of the U.S Dollar and can evade the scrutiny of US sanctions.
Significance of INSTEX in International Relations
The establishment of INSTEX is a testament to the ongoing commitment shown by France, Germany, and the UK towards the JCPOA. Despite the United States withdrawing from the agreement, these countries continue to uphold their end of the bargain.
The recent additions to the participants in INSTEX further strengthens this commitment and adds a new dynamic to the international understanding and diplomacy surrounding the Iran nuclear deal.
Table of Key Facts
| Event | Date |
|---|---|
| US Withdrawal from JCPOA | 2018 |
| Establishment of INSTEX | January 2019 |
| Six Countries Joining INSTEX | Recent |
Current State of INSTEX
Although the system exhibits an innovative solution to maintain trade relations with Iran, it has been observed that INSTEX has not yet enabled any transactions. This could be due to the complicated financial and logistical requirements of the process, or perhaps due to the still potent influence of U.S sanctions. Nevertheless, with increased participation and ongoing developments, the future of INSTEX as a viable trade mechanism remains promising.
