ERBIL, Kurdistan Region — Europe is yet to designate a bank to handle a proposed barter trade system between Iranian and European firms on the eve of a deadline set by President Hassan Rouhani who has threatened Tehran would increase the enrichment of uranium to any level it desires if the Europeans fail to take adequate actions.
Despite claims that the European trade channel (known as INSTEX) is operational, the head of Special Trade and Finance Institute (STFI) which is the Iranian equivalent of the system, says that the Europeans have not assigned a bank to handle the trade.
“Right now, our request for the Europeans side is for them to introduce a bank to become the intermediary between the European and Iranian buyers and sellers,” Ali Asghar Nouri the head of STFI said on Saturday. “We have consulted about this but no bank has been introduced to us officially.”
Nouri elaborated in an interview with Tasnim News on the complexity of the barter trade system and the pre-conditions including banking requirements for the mechanism before it could be activated.
“In the first phase, we ask some traders who export directly to Europe to use the STFI as a test…in this regard we have spoken to some renowned and experienced exporters and some of them have promised to assist,” Nouri said.
The Instrument in Support of Trade Exchanges (INSTEX), also known as the Special Purpose Vehicle: a legal mechanism to shield EU firms trading with Iran from US sanctions pic.twitter.com/fbXYlYEVOg
— AFP news agency (@AFP) February 1, 2019
He rejected the idea that the banks are staying away from INSTEX because they are scarred to incur US fines due to the financial and economic sanctions on Iran, instead saying INSTEX is a legal vehicle and if it was not, the Europeans would have floated establishing it.
The liquidity for the deal is another major obstacle as Iranian oil exportation has dwindled to less than 500,000 barrels per day (bpd) since Washington cancelled oil waivers to eight major buyers in May, triggering a strong reaction from Tehran.
“…in order to provide liquidity, the Europeans must buy our oil so we can deposit the proceeds into this company [STFI] in order to use the proceeds to import,” Nouri detailed. “We emphasized that if Europe cannot buy our oil, there must be a line of credit meaning that Europe will provide [financial] services and in return we pay back the dues from the sale of oil.”
President Hassan Rouhani warned on Wednesday that Tehran would take a dramatic step in suspending its commitment under the Joint Comprehensive Plan of Actions (JCPOA) by raising the level of enrichment of uranium which received strong reactions from the Europeans and United States.
“…we will put aside our commitment in relation to the level of enrichment and we will increase to any level that we wish depending on the needs and our requirements” Rouhani said. “From July 7, we will return the Arak Reactor to the previous level, to the level that you claimed ‘Was dangerous and could produce plutonium,’ unless you fulfill all your commitments in relation to Arak Reactor.”
Iran’s Arak Reactor is permitted under the guidelines of the nuclear deal to be used for non-weaponized nuclear research and is to be monitored by co-signers, in particular the United Kingdom and China.
Since May 2018 when the US withdrew from the JCPOA and re-imposed severe economic sanctions on Tehran, tensions between the two countries have increased and a series of incidents in recent months have brought the two adversaries to the verge of military conflict.
In the latest incident on Thursday, a unit of British Royal Marines seized a supertanker containing 2 million barrels of Iranian oil allegedly heading to Syria which is under European Union sanctions. Iran threatened to retaliate. On Saturday rumors spread that a British tanker had stopped unexpectedly in the Persian Gulf, but Tehran denied the rumors.
Despite the looming deadline as the tension grows the head of Iran’s Special Trade and Finance Institute (STFI) is not sure when the vehicle would become operational.
“During the two months this company has been set up in Tehran, we have tried to complete the prerequisites required for INSTEX and STFI to work together,” Nouri said. “So until such a time that the financial mechanisms and the nature of the exchanges are defined, it is not possible for definite to say when this special financial mechanism will be operational and when services could be provided to the companies in private sector.”
