Bernd Erbel, a 72-year-old former German ambassador to Tehran, told the foreign ministry in Berlin this week that he would not be available to take over the role as Instex chief for "personal reasons," a ministry spokeswoman said on Friday.
Erbel's decision follows a report in German tabloid Bild drew attention to a YouTube interview in which Erbel voiced criticism of Israel and its role in the Middle East and showed understanding for Iran's ambitions to develop a ballistic missile program.
The Instex plan is part of efforts by France, Britain and Germany over recent months to salvage a nuclear accord between Iran and major powers.
The 2015 deal, under which many international sanctions against Iran were relaxed in exchange for Tehran curbing its nuclear program, has teetered on the brink of collapse since President Donald Trump pulled the United States out of it last year.
Germany is expected to liaise with its European partners in the coming days about who could take Erbel's place as the new Instex head.
The three EU countries, also known as E3, are trying to set up Instex as a barter-based trade conduit with Iran, but an Iranian mirror mechanism has yet to be established.If the mechanism goes ahead, it would initially deal only in products such as pharmaceuticals and foods, which are not subject to U.S. sanctions. Iranian officials have repeatedly said Instex must include oil sales or provide substantial credit facilities for it to be beneficial.