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Opinion | Can INSTEX unite India, China and EU to bypass US sanctions on Iran?

As Iran is crucial for India to expand its options in the entire Eurasian region, establishment of any additional alternative mechanism of financial interaction with Tehran is going to be useful.

February 05, 2019 / 08:30 AM IST
Iran | Cost per litre - Rs 20.58 | A gas flare at an oil production platform is seen in the Soroush oil fields alongside an Iranian flag in Iran. (Image: Reuters)

Iran | Cost per litre - Rs 20.58 | A gas flare at an oil production platform is seen in the Soroush oil fields alongside an Iranian flag in Iran. (Image: Reuters)

Gulshan Sachdeva

To further strengthen its commitment to the Iran nuclear deal or the Joint Comprehensive Plan of Action (JCPOA), the European Union (EU) has taken a concrete step. To circumvent US sanctions, Iran and the EU had already agreed to set up a separate legal payment mechanism in September 2018.

On January 31, three European countries — France, Germany and UK (named as E3) have launched a special payment vehicle called INSTEX or Instrument in Support of Trade Exchanges. This EU-supported mechanism will facilitate European trade with Iran. The E3 foreign ministers declared in a joint statement that initially, the INSTEX will support “pharmaceutical, medical devices and agri-food goods”.

To begin with, the Euro-denominated barter arrangement will work for limited transactions. Later, it could be extended to energy transactions and also to third countries. In a statement, the EU High Representative for Foreign Affairs & Security Policy Federica Mogherini asserted that the mechanism “will provide economic operators with the necessary framework to pursue legitimate trade with Iran”.