France, Germany, UK create financial clearing house to shield Iran trade

France, Germany, UK create financial clearing house to shield Iran trade

By Luke Vargas   
Published
Paris will play house to the INSTEX financial clearing house. Flickr photo: barnyz
Paris will play house to the INSTEX financial clearing house. Flickr photo: barnyz

The INSTEX clearing house aims to allow European companies to engage in trade with Iran beyond the reach of U.S. interference.

UNITED NATIONS — European countries unveiled a long-awaited financial clearinghouse this week aimed at allowing businesses to trade with Iran beyond the reach of U.S. interference.

That idea first emerged after President Trump withdrew from the 2015 Iran nuclear deal last year, but countries worried that volunteering to host the clearinghouse could provoke a White House that has threatened sanctions against those who transact with Iran.

While small countries such as Luxembourg were initially courted to host the clearinghouse, it’s now to be hosted in France and backed by Germany and the United Kingdom. Each country remains party to the Iran nuclear deal and are Europe’s three largest economies.

Ellie Geranmayeh is a senior policy fellow at the European Council on Foreign Affairs.

“It makes sense that they would be the ones to stick their neck out first, because in combination these three I think have a better chance politically and economically to push back against any potential U.S. pressure.”

For now, INSTEX (as the clearinghouse is known) will allow companies to trade only essential goods like food, medicine or medical equipment with Iran — none of which is prohibited by U.S. sanctions. But many firms have still been hesitant to engage in any trade — banned or not — nervous they’ll end up on Trump’s bad side.

Nevertheless, Geranmayeh says the clearinghouse in its current state is likely to be used, and that’s important if the goal is to normalize dealings with Iran.

“There is a large volume of trade with Iran in this area of goods from European companies, so it will actually practically, hopefully, have a tangible impact on the ground in Iran.”

Geranmayeh says that while Iran’s government has welcomed the creation of INSTEX, critics of President Hassan Rouhani see things a bit differently.

“Government opposition factions inside Iran have almost claimed that this mechanism is dead on arrival, because it essentially is allowing Iran to do trade that it already should be able to do, and they don’t see this as an act of bravery or courage or real political commitment from the European side.”

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