Jan 31, 2019 18:32 Asia/Tehran

Iranian Deputy Foreign Minister Abbas Araghchi has expressed hope that the EU-Iran special payment mechanism, known as INSTEX, will be used to pay for all kinds of goods and services.

Iran Press/Iran news: Iranian Deputy Foreign Minister Abbas Araghchi expressed hope the EU-Iran payment vehicle INSTEX (Instrument in Support of Trade Exchanges) is completed fully and is not deficient, saying "SPV launch is the first step for EU to fulfil its commitments under the nuclear deal."

"All of Iran's imports and exports will be put into this financial mechanism," Araghchi, who is now in Bulgaria, told IRIB Channel 1 on Thursday.

Iran is also planning to establish a similar mechanism for this purpose in order to implement transactions in Rial for Iranian sides, he added.

According to an Iran Press report, Araghchi underlined that the special purpose vehicle INSTEX creates a system for companies wishing to do business with Iran to make financial transactions through this mechanism.

INSTEX expected to cover also non-European trade with Iran

He also stressed that this mechanism will provide us with the full benefits if it is available to non-European countries or companies, as well, which is scheduled to be operated in the next phase, and in this case, our international purchase system can be monitored under this mechanism.

As we know, he said, the Europeans have designed this mechanism in such a way that companies wishing to do business with Iran are not subject to US sanctions, while the United States' pressures remain.

Confronting the US threats

"The United States has warned them previously of operating such a mechanism, but we hope the Europeans have considered all the details regarding how to deal with US sanctions," Araghchi noted.

"Americans have threatened to confront this mechanism, that's why it took long for Europeans to launch this mechanism since they were trying to find solutions to prevent US sanctions from being operational," Araghchi reiterated.

What is INSTEX?

Regarding some speculations that this mechanism is designed only to sell food, medicine and medical devices in Iran, Araghchi said: "It may initially serve this purpose. However, it will be expanded for sanctioned goods in the future. Special purpose vehicle INSTEX is basically for sanctioned goods."

In our view, Araghchi added, this is the first step for the European Union to fulfil its commitments under a nuclear deal between Tehran and major powers, and which were formulated in a statement issued in May 2017 between the foreign ministers of Iran and the three European countries (Germany, UK and France); "This is the first step that is taken by Europeans to open up a banking channel with Iran."

He expressed hope that this financial channel would be fully implemented covering all kinds of goods.

"The main purpose of this mechanism is to support companies that want to do business with Iran," said the deputy foreign minister, adding "How willing they are to get engaged in business depends on the mechanism being properly designed." 

Araghchi said that the plan and details will be announced today, after EU foreign ministers meet in the Romanian capital, Bucharest, in an informal gathering.

The channel, set up by Germany, France, and the UK (E3), is called INSTEX— short for "Instrument in Support of Trade Exchanges."

According to media reports, INSTEX will be based in Paris and be managed by German banking expert Per Fischer, a former manager at Commerzbank. The UK will head the supervisory board, Deutsche Welle reported.

The Trump administration has repeatedly warned the European Union against trying to sidestep sanctions on Iran. Trump pulled the US out of the 2015 Iran nuclear deal and reimposed sanctions last year. Along with fellow signatories Russia and China, the EU maintains that Iran has not broken its side of the deal and should be allowed to trade.

Iranian officials have expressed frustration and skepticism over the slow European response to the re-imposition of US sanctions but have pledged to maintain its nuclear deal commitments so long as it receives the promised economic benefits.

The three biggest EU member states, France, Germany, and the UK, have officially set up a payment channel to facilitate business transactions with Iran and to circumvent US sanctions against Tehran.

INSTEX will be based in Paris and managed by a top German Banker.

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