EU’s Iran deal aims to break dollar grip

The financial payments channel set up by France, Germany and Britain, and due to receive the endorsement of the rest of the EU on tomorrow (Thursday), appears to have limited initial ambitions but is being seen as a first step to ending the global dominance of the dollar.

If the scheme to keep the 2015 nuclear agreement operating works, it is likely to be most useful to SMEs with no links in the US.

France’s finance minister Bruno Le Maire has repeatedly called for greater European economic autonomy from Washington and Brussels has been studying plans to challenge the dollar’s international dominance.

But major European firms with large US investments will be too vulnerable to sanctions to initially take part.
The trilateral company was registered in Paris last week with an initial €3,000 in capital and a supervisory board with members from France and Germany, and chaired by a British diplomat.

The Instex, standing for “instrument for support of trade exchanges”, hopes to assert European economic sovereignty in the face of Washington’s determination to impose its foreign policy on Europe.

Iran’s foreign minister, Javad Zarif, welcomed the financial mechanism as a “long overdue first step”.

“We remain ready for constructive engagement with Europe on equal footing and with mutual respect,” the minister tweeted.

The primary focus would be on trying to alleviate the trade in humanitarian supplies to Iran, said German foreign minister Heiko Maas. Medicines and food are not supposed to be subject to Trump’s sanctions.

The scheme was eventually intended to allow Europe to trade freely with Iran in a range of goods, including those subject to US sanctions, said the European foreign affairs commissioner, Federica Mogherini (pictured).

Instex, designed as a payment channel from Europe to Iran, is not expected to be fully operational until later this year when Tehran has established a parallel organisation.

UK foreign secretary Jeremy Hunt was keen to sound diplomatic towards Washington. The Conservative minister said: “The entity will facilitate legitimate trade under European and international law. Its immediate focus will be on enabling trade in goods where the immediate need of the Iranian people is greatest, ie foodstuffs, pharmaceuticals and consumer goods.”

He called the 2015 nuclear agreement “crucial for the security of the region”, adding that the scheme did not absolve Tehran from the need to end destabilising activities across West Asia, including in Syria and Yemen.

 

Federica Mogherini. Europe is looking to challenge the dollar. Picture credit: Wikimedia