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Iran: European Financial Initiative Will Come into Force by End of 2018

Iran: European Financial Initiative Will Come into Force by End of 2018

Tuesday, 18 December, 2018 - 08:30
An Iraqi vendor sells Iranian currency in a street in Najaf. (AFP)

The European Union’s financial initiative intended to protect trade with Iran against newly reimposed US sanctions will come into force by end of 2018, announced head of Iran’s Strategic Council on Foreign Relations Kamal Kharazi.

Promises to activate the special purpose vehicle (SPV) before the end of the year were made during negotiations between Foreign Minister Mohammed Javad Zarif and European parties, Kharazi told reporters on the sidelines of a conference in Tehran entitled “Peace and Stability in West Asia; One Region, One Fate”.

Zarif and senior aides have repeatedly criticized the delay of European steps to confront the US sanctions.

In November, western diplomats told Reuters that the EU has so far failed to find a country to host a special mechanism to trade with Iran as governments fear being targeted by US counter measures.

Austria, Belgium and Luxembourg declined a request to play host for the SPV, and reports stated that there are talks to activate the mechanism in France, but Paris did not comment on the matter.

Europe’s plans to activate the financial mechanism faced obstacles after the Belgium-based SWIFT financial messaging service announced earlier it will be disconnecting some Iranian banks.

During his weekly press conference on Monday, Iranian Foreign Ministry spokesman Bahram Ghasemi, addressed claims that the Iran-EU trade mechanism will only meet Iran’s needs for medicine and food products in exchange for the country’s oil revenues.

“This mechanism has not been defined to only cover medicine and food products, and it must cover a range of transactions and economic and industrial cooperation, even investment,” he stressed.

Regarding Iraq’s 45-day waiver granted by the US over Iran sanctions to import gas and electricity, Ghasemi said while Washington continue its futile attempts to undermine cooperation between Tehran and Baghdad by sending delegations, both countries are now perceiving the US hostile policies with new perspectives and will make their own decisions independently.

He further stressed that economic cooperation between Iran and Iraq would expand in the future.

Meanwhile, the Fars news agency revealed that Iran and Iraq are negotiating the possibility of halting dollar-based trade between them.

The Iraqi and Iranian governments are preparing to formally establish a line of credit between the banks of the two countries formally, and use their currencies in trade exchange.

The Fars report revealed that Iran and Iraq’s central banks are finalizing the mechanism to use Iranian riyal and Iraqi dinar in exchange between the two neighbors.

Chairman of the Iran-Iraq Joint Chamber of Commerce Yahya Al-e Eshaq confirmed these reports.

He revealed that during eight months of the current Iranian year, which started on March 21, products worth $8 billion were exported to Iraq.

Discussions were held with the Iraqi officials to simplify export procedures, Eshaq explained, adding that if an agreement is reached, the banks of the two countries may open a letter of credit to each other.

Fars claimed that Iran’s export to Iraq in the 8-months period registered a considerable 67 percent hike in terms of weight and value, as compared with last year’s corresponding period.

The agency reported that Iran exported 14.216 million tons of goods worth $6.757 billion to Iraq.

Iran’s attempts to activate the European mechanism come at a time when the Iranian government finds it difficult to pass the regulations of the law to prevent money laundering and combat financing of terrorism, which prevents Tehran from joining the Financial Action Task Force (FATF), one of Europe’s main conditions for establishing a financial cooperation with Iran.

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