Recently we saw that EU and Iran devised an instrument called INSTEX to avoid dealing in dollars and hence avoid US sanctions. Similar thing is being planned between India and Russia (regarding S-400 deal) to avoid sanctions from US under CAATSA.

I don't understand how changing the currency under the deal circumvents the problem. Isn't the whole problem is regarding deal itself rather that the currency? US can still impose sanctions if it gets to know that a deal has happened. Then how does this INSTEX work?

Sorry if I posted it on the wrong platform. I don't know where to go for such international, political and economical questions.

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    $\begingroup$ One way to look at it is, there is the intent of sanctions, and the mechanism of sanctions. Short of engaging in direct hostilities, there are very few mechanisms to enforce sanctions. The banking system is one such mechanism - INSTEX circumvents that. Your question seems to wonder more about the intent, and without running to Google I would suspect that the US is not terribly happy about INSTEX. :) $\endgroup$ – heh Oct 10 '19 at 21:42
  • $\begingroup$ Oh yes ! That makes sense. $\endgroup$ – Ankur Singh Oct 12 '19 at 1:58

You should check the German wikipage on Instex (use a translator to read them). Here is the short translation on the purpose of Instex.

Instex was initiated in January 2019 as a special purpose vehicle designed to facilitate the settlement of transactions in Iran without penalties imposed on private banks by the use of US currency. The special purpose vehicle is intended to enable European companies to do business with Iran, despite strict US sanctions. As an exchange, it clears claims of European and Iranian companies. This allows Iran to export oil or other products. Money does not flow through banks to Iran, but to European companies selling goods to Iran.


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