EU-Iran trade instrument INSTEX completes first transaction with Iran

The Instrument in Support of Trade Exchanges ("INSTEX") for the processing of transactions between Europe and Iran has completed its first transaction. This was reported by the founding member states, the UK, France and Germany (known as the “E3”) on 31 March 2020. The subject is a delivery of medical products to Iran. Further transactions are to follow.

Since the unilateral withdrawal of the United States from the Iran nuclear deal – the Joint Comprehensive Plan of Action ("JCPOA") – and the reinstatement of US sanctions against Iran, Europe's economic relations with Iran have largely stalled, owing to the looming threat of secondary sanctions for EU companies. The E3, which are all parties to the JCPOA, hope to use INSTEX to expand trade relations with Iran and to persuade Iran to adhere to the JCPOA (see our News of 1 February 2019).

INSTEX acts as a barter clearing house in conjunction with its Iranian counterpart STFI. This means that goods are exchanged between Iranian and non-Iranian companies without direct transnational financial transactions. In this way, trade with Iran is to be conducted without involvement of the US financial market infrastructure and without the risk of sanctions being imposed on European or other banks.

The INSTEX member states (the E3, plus a fairly large group of EU member states, as well as Norway) are planning to process more and more transactions via INSTEX and to establish INSTEX as a sustainable long-term solution for legitimate trade between Europe and Iran in the face of continued US sanctions against Teheran. New member states are expected to join INSTEX in the course of the year.

So far, trade for non-Iranian companies authorised through INSTEX is limited to humanitarian aid, medicines, medical products and agricultural goods – all of which are goods not subject to US secondary sanctions. INSTEX member states have stated in the past that the type of goods tradable via INSTEX should be expanded eventually beyond non-sanctioned sectors, but whether, when and to what extent this may happen is not foreseeable at present.