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Policy brief | 28 June 2019

Protecting Europe-Iran Trade to Prevent War: A Provisional Assessment of INSTEX

Despite the tensions and rhetoric, Europe and Iran have to date remained committed to preserve the JCPOA. The practical behind-the-scenes work to keep diplomacy on track is exemplified by the state-owned entity INSTEX, intended to alleviate restrictions on sanctions-exempt humanitarian trade. These restrictions stem from the reluctance of European companies and banks to conduct cross-border transactions with Iran due to a lack of clear guidance from the US Departments of State and Treasury.

New analysis by Bourse & Bazaar and the European Leadership Network evaluates INSTEX’s design and operationalization. Drawing on meetings with European officials, business leaders, and legal and financial experts engaged in discussions around the mechanism, the report sets out how INSTEX will operate, and makes clear that it is a limited solution for a specific problem.

E3 governments (France, Germany, and the United Kingdom) will soon announce further steps to operationalise INSTEX. The test for European policymakers is whether INSTEX’s first transactions can take place before July 7th, before Iran’s 60-day deadline. Iranian and European policymakers will then determine whether this forms an effective European response to Iran’s pending escalation on the nuclear aspects of the JCPOA.

The report’s authors argue that INSTEX cannot directly counteract the Trump administration’s “maximum pressure” campaign nor can it fully deliver on the JCPOA’s economic promises. Given its focus on humanitarian trade, INSTEX can help Iranian people by reducing the inflationary impact of increases in the price of imported goods.

The report aims to provide further clarity for the business community about the intended operation of INSTEX, while highlighting the remaining challenges facing policymakers in both European capitals and Tehran as they seek to complete the first transaction.

Read the full report here

The opinions articulated above also do not necessarily reflect the position of the European Leadership Network or any of its members. The ELN’s aim is to encourage debates that will help develop Europe’s capacity to address pressing foreign, defence, and security challenge.