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How Instex, Europe's Trade Channel With Iran, Will Work


Iran says it's ramping up its nuclear program because U.S. sanctions are keeping it from getting the benefits promised in the 2015 nuclear deal. And that's where something called Instex comes in. It's a financial office that Europe set up to try to continue doing at least a little business with Iran despite U.S. sanctions. NPR's Deborah Amos joins us from Berlin, where she's been reporting on it. And, Deb, first, the basics, right? Instex is a bank or a trade office. What exactly is it?

DEBORAH AMOS, BYLINE: Very simply, it's a barter system created by the French, the Germans and the Brits. So in any trade, money gets paid into the home country's account, and it doesn't cross the border in or out of Iran. There's also an office in Tehran, too.

So the idea is this gets around the U.S.-dominated international trading system. So companies that want to do business in Iran, they have another avenue. It took more than a year to set this thing up. Nobody's ever done it before. And it's complicated. The Europeans announced last week that Instex is up and running, and the first trade is expected soon.

CORNISH: Why is this necessary? Is there no other way around the U.S. system?

AMOS: Well, the Europeans still support the nuclear deal. So they say it keeps Iran from building a bomb. The U.S. wants a tougher deal. Trump walked away from it last year, and he re-imposed these punishing sanctions. And he threatened that any company doing business with Iran will get shut out of the much bigger U.S. market.

And so at the same time, the U.S. threatened the Europeans. They say Instex OK as long as it doesn't trade anything but food and medicine. You know, these are the items that aren't on the sanction list, but companies and banks in Europe are so scared of U.S. punishment that they need cover from Instex, and that's what it gives them. And their own government gives them cover, too.

The problem is the Iranians don't like the limits. And they say if Europe doesn't come up with more economic benefits, it's going to take another step away from the nuclear deal.

CORNISH: What does the U.S. have to say about Instex now that it's close to operation?

AMOS: They don't say a whole lot. They're downplaying this because what they say is, you know, who cares? Food and medicine aren't banned anyway. And they continue to say no oil sales at all because the shutting down of oil sales is part of Washington's policy of maximum pressure.

CORNISH: Well, that's the geopolitics, but what about the business side? I mean, how are businesses reacting to the idea of this?

AMOS: Well, here's the problem in this whole setup. You know, European governments have a foreign policy, and it is that they support the nuclear deal. But you can't make private businesses take a risk that they don't want to take. They are worried about getting shut out of the U.S. market, much bigger than Iran.

And so what you see is small companies may take the risk, companies that have already been trading with Iran. But it will not be big. It certainly won't answer Iran's question, which is, why aren't we getting the economic benefits that we were promised in the nuclear deal? And, Europe, you are still for this deal, so why aren't you doing more?

CORNISH: So right now, Iran is saying that by this weekend, by Sunday, they are ready to surpass another limit that was in the nuclear agreement. So in the end, can Instex do what Europe hoped it would?

AMOS: Maybe yes, maybe no. But at the moment, Iran is saying no, so that's a bad sign because for them, oil is the big deal. But the Europeans hope that this could be a face-saving thing to buy some time. And the fact that everybody is still talking about Instex, the fact that we're talking about Instex, it may be that that is the only game in town.

CORNISH: That's NPR's Deborah Amos. Thanks for explaining it.

AMOS: Thank you. Transcript provided by NPR, Copyright NPR.

Deborah Amos covers the Middle East for NPR News. Her reports can be heard on NPR's award-winning Morning Edition, All Things Considered, and Weekend Edition.
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