The Wilson Times | Cyrus Shamloo: Russia has strengthened its ties with Iran in recent years as part of Moscow’s increased geopolitical importance in the Middle East and to this end along with Germany, France and Britain, initiated Instex, or the Instrument in Support of Trade Exchanges, which is now operational. Its primary function is to circumvent both SWIFT, the Society for Worldwide Interbank Financial Telecommunications, as well as U.S. sanctions banning trade with Iran.
Moscow’s involvement in the Instex channel would mark a significant step forward in attempts by the EU and Russia to rescue a 2015 Iran nuclear deal that has been unraveling since the Trump administration abandoned it last year. A response from the U.S. is now assured because, in the biggest attack on the dollar as a reserve currency to date, Russia signaled its willingness to join the controversial payments channel and has called on Brussels to expand the new mechanism to cover oil exports.
The more countries and continents involved, the more effective will the mechanism be as a whole — and the more isolated the U.S. will be as a currency union meant to evade SWIFT and bypass the dollar’s reserve currency status will soon include virtually all relevant and important countries. Only China would be left outstanding, however, China has its own unique trading relationship with Iran but will likely join in at a later date.
Since Donald Trump pulled out of the deal last May, its other signatories — Germany, France, the UK, China, and Russia — have scrambled to find ways to maintain trade with Iran. But they have been stymied by companies’ reluctance to risk Washington’s wrath. Iran wants Europe to buy its oil so that it can use the hard currency earnings to import basic commodities and medicines through Instex, and Russia is seeking to find ever more creative ways to chip away at U.S. global dominance, with a focus on the dollar’s reserve currency status.
Winning the battle at any cost may mean losing the war.