The establishment of a trade finance mechanism, one that is similar to INSTEX (Instrument in Support of Trade Exchanges), was discussed during Iranian Foreign Minister Javad Zarif's visit to Ankara last week. The issue has already created a stir in the Turkish business world.
Ümit Kiler, the chairman of the Foreign Economic Relations Board (DEİK) and the Turkey-Iran Business Council, said this would boost bilateral trade. He stressed that the new mechanism could unlock trade with Iran. "It could boost bilateral trade by a more than 100 percent within a year, reaching $20 billion," he said.
Recalling that the trade volume with Iran stood at $10 billion in 2018, Kiler said they aim to push that number to $12 billion this year.
Murat Akyüz, chairman of Istanbul Chemicals and Chemical Products Exporters' Association, said Iran could surely become one of their top 10 markets with this move.
Plastics Industry Foundation (PAGEV) Chairman Yavuz Eroğlu, on the other hand, pointed out that they aim to export $250 million worth end products to Iran.
Germany, France and the U.K. jointly established INSTEX in non-dollar currencies at the beginning of this year to bypass the U.S. sanctions and trade with Iran.
This development has increased the expectation of Turkey's apparel sector in the Iranian market. Istanbul Apparel Exporters' Association (İHKİB) Chairman Mustafa Gültepe said they have gathered notable experience in the ruble-based trade with Russia. "Iran is a very appealing and high-potential market for our sector. The only inconvenience is Iran's import bans on our industry," he continued and suggested that regulation in this direction could increase sales.
In a joint press conference with Zarif, Foreign Minister Mevlüt Çavuşoğlu said Turkey is looking into establishing new trade mechanisms with Iran, similar to that of INSTEX, set up by European countries to avoid U.S. sanctions, reimposed last year on exports of Iranian oil.
Çavuşoğlu reiterated Turkey's opposition to the sanctions and said Ankara and neighboring Iran needed to keep working to raise bilateral trade to a target of $30 billion, around triple the current levels.
"Along with the existing mechanisms, we evaluated how we can establish new mechanisms, like INSTEX... how we can remove the obstacles before us and bilateral trade," the foreign minister said. Cavusoglu did not go into details about the new mechanisms but Turkey has a track record of using national currencies in international trade. In October 2017, the Turkish and Iranian central banks formally agreed to trade in their local currencies after using euro for settlements in the past.
After reimposing sanctions on Iran, Washington granted waivers to eight nations including Turkey that reduced their purchases of Iranian oil, allowing them to keep buying it without incurring sanctions for six more months. Turkey is expecting the extension of the waiver - an issue discussed last week during Treasury and Finance Minister Berat Albayrak's meetings in Washington with U.S. President Donald Trump and his counterpart Steven Mnuchin along with other U.S. officials.
On April 8 the U.S. president said he would formally designate Iran's Revolutionary Guards a "terrorist organization." Following the decision, the Iranian parliament ratified a bill designating the U.S. Central Command (CENTCOM) a "terrorist organization."
Presidential Spokesperson İbrahim Kalın said Tuesday that Turkey expects the Trump administration to extend an existing sanctions waiver that is set to expire at the end of May to allow Turkey to continue importing Iranian oil.