Trading house: Russian, Ukrainian INSTEX for trade with Iran

Ukrainian and Russian officials have separately called for the establishment of a trading house between their respective countries and Iran. A trading house could have various purposes but what Ukraine is proposing is much like Europe’s INSTEX to facilitate bilateral trade in the wake of US sanctions.

Ali Dashti

20 July 2019
ID : 22112
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A proposal by Ukrainian Ambassador to Iran Sergey Burdilyak to create a trading house between Kiev and Tehran is meant to put in place a mechanism much like Europe’s INSTEX, says a Ukrainian embassy official in Tehran as Russia also has urged a similar structure.

“It was a proposal by Shiraz Chamber of Commerce, Industries, Mines and Agriculture (SCCIMA) President Jamal Razeqi Jahromi that like INSTEX, Iran and Ukraine have a similar system for trade,” Ukraine Embassy Commercial Counsellor Yevgen Kravchenko told Iran Chamber Newsroom.

He was referring to a meeting between the Ukrainian envoy to Iran and Shiraz Chamber of Commerce president in the southern Iranian city back on 25 May.

Then, head of the Ukrainian diplomatic mission in Iran had proposed that such trading house be set up in the country and later its offices be opened in Iran to help facilitate trade base on national currencies, ditching the US dollar.

“Ukraine’s ambassador talked about barter trade mechanism between Iran and Ukraine which needs to be agreed on and studied more before it will be finalised,” Kravchenko added in the phone interview.

INSTEX (Instrument in Support of Trade Exchanges) was created by France, Germany and the UK, the three European signatories to the nuclear deal, back in January, four months after Mogherini had announced Europe would create a Special Purpose Vehicle (SPV) following the US withdrawal from the JCPOA and reimposition of unilateral sanctions.

A trading house is a business that specializes in facilitating transactions between a home country and foreign countries. A trading house is an exporter, importer and also a trader that purchases and sells products for other businesses, according to Investopedia.

“We want to create a joint company between Iran and Ukraine so that with the support of both countries’ chambers of commerce, we both can have exports,” explained Kravchenko.

The mechanism will serve to be able to export agricultural goods from Ukraine to Iran in return for Iranian petrochemical, ditching the US dollar in a bid to ease bilateral trade between countries after the US sanctions on Iran.

What is Iran-Ukraine Joint Chamber of Commerce good for?

Kravchenko believes that the joint chamber “isn’t that active” and that is why there is a need for such financial entity to be set up.

“This is one of the proposals to create this trading house with help from Iran-Ukraine Joint Chamber of Commerce,” he mentioned.

He reiterated that the channel isn’t meant to overshadow the chamber or run parallel to it. “The trading house won’t be a parallel structure to the joint chamber of commerce,” according to Kravchenko.

However, the news hasn’t been welcomed at the Iran-Ukraine Joint Chamber of Commerce.

Seyed Reza Nurani, a member of the chamber’s board is perplexed. “I don’t think creating a parallel structure benefits anybody. I don’t understand why there is need for such thing when there is a joint chamber of commerce,” he asked rhetorically.

Nurani stressed that “bilateral trade should be carried out through the banking system”. The US unilateral sanctions, reimposed last year, have choked international banking relations with Iran.

Iran-Ukraine Joint Chamber of Commerce President Hamid Reza Qadi couldn't be reached for comments. 

A trading house, in the sense that has been proposed by Ukraine, has also been raised by Russian officials.

Back in June, Aleksandr Buyda, director of Russian Engineering Union in the Volgograd region, said it was necessary to set up a trading house between Iran and Russia to better facilitate bilateral trade.

He was referring to a similar company that could ease bilateral trade ties between Iran and Russia.

What is clear is that traditional avenues of handling foreign trade have all been identified and blocked by the US as part of the country's so-called "maximum pressure" campaign on Iran. Tehran and the private sector need to revise trade relations and come up with new ideas and ways to turn the tide. 

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