Despite US sanctions, six more countries recently joined INSTEX, the Iran Barter system. INSTEX payment mechanism set to bypass US sanctions and begin trade with Iran. It might be the future of payments of basmati rice from Iran since India’s negligible crude oil imports from Iran.
The Accession
France, Germany and the United Kingdom, the founding members of INSTEX appreciated the joining of six more countries in the barter system. The countries include Belgium, Denmark, Finland, the Netherlands, Norway, and Sweden.
Established on 31st January 2019, INSTEX (Instrument in Support of Trade Exchanges) headquartered in Paris to facilitate non-USD and non-Swift transactions. It allows Iran to import products and services from European countries in exchange for oil. The six countries confirmed the importance of JCPoA and declared it as the major contributor to the stability of the region. The founding members said that the decision depicts European efforts to promote legal trade between Iran and Europe. The expansion of the clearinghouse will strengthen INSTEX. They further added that the decision clearly expresses members’ commitment to the Iranian nuclear deal of 2015.
After the pullout of the US from the nuclear deal and imposing of sanction on Iran, it began to exceed some uranium-enrichment limits set under the pact. Concerning this, the trio declared that now Iran must fully comply with the deal without any delay. INSTEX a step forward to contain Iran’s nuclear programme without hurting their economy.
Future of Basmati Rice Payments
Being the largest importer of high-quality Indian Basmati rice, Iran accounted for 34% of total Basmati exports during 2018-19 from India. After US sanctions, the Iranian government stopped issuing Indian currency to Iran importers resulting in delayed payments to the exporters. This resulted in Basmati prices crashing by about 15%. The payments stuck at Iran ports negatively affected farmer’s income this harvest season. Therefore, basmati exports from India to Iran require new payment mechanism. Imports of crude oil or any other products from Iran are at minimal. INSTEX might be the answer to payment troubles of basmati exporters to Iran.
The scope of INSTEX payments is confined to humanitarian goods including food products. Basmati rice falls under food category and INSTEX method might bypass US sanctions.