European countries set up payment channel with Iran to bypass USA sanctions

French Foreign Minister Jean Yves Drian, UK Foreign Secretary Jeremy Hunt and German Foreign Minister Heiko Maas announced the new instrument in Bucharest

French Foreign Minister Jean Yves Drian, UK Foreign Secretary Jeremy Hunt and German Foreign Minister Heiko Maas announced the new instrument in Bucharest

Three European nations appeared poised Thursday to announce they have created a way for Iran to continue trade with them and avoid re-imposed us sanctions, two Iranian officials said, setting up a potential collision with President Donald Trump's maximalist approach against Tehran.

It is the most ambitious attempt by European allies to save the Iran nuclear deal from collapse following President Trump's decision to withdraw from it.

Germany, France and Britain have officially set up a European mechanism to facilitate non-dollar trade with Iran and circumvent USA sanctions, two diplomats said on Thursday.

In recent months, Iranian officials have increasingly threatened to resume higher enrichment, putting more pressure on Europeans to come up with a way to get around the sanctions. On Thursday morning, the German broadcaster NDR reported that the vehicle was finally here, in the form of the Instrument in Support of Trade Exchanges, or INSTEX. The new organization-to be headquartered in France, run by a German, and supervised by the British-will start out enabling trade only in humanitarian items, including food, medicine, and medical devices, diplomats said. Its immediate focus will be on enabling trade in goods where the immediate need of the Iranian people is greatest, i.e. foodstuffs, pharmaceuticals and consumer goods.

According to the United Nations nuclear watchdog, the International Atomic Energy Agency (IAEA), Tehran has so far abided by the terms of the deal in regard to nuclear development despite the US withdrawal.

The bloc has been working on this financial mechanism for months in an effort to reassure European companies.

Washington says that although Iran complied with the terms of the deal, the accord was too generous, failing to rein in Iran's missile programme or curb its regional meddling.

The company's formal objectives are to "support legitimate trade with Iran", according to the entry in Petites Affiches, a French journal for official corporate announcements. A White House spokesperson said that "the United States questions the efficacy of the [special objective vehicle] and remains committed to fully enforcing its sanctions on the Iranian regime".

So the Europeans have for months been trying to work out a "special goal vehicle" to allow the continuation of trade with Iran.

Saudi Arabia, UAE Aim to Cut Payments Costs With Common Digital Currency
SAMA and UAECB agreed that at the initial stage of project implementation they will focus on technical aspects. However, there are still some aspects of worldwide remittances that need further development.

"It's not a "circumvention" of USA sanctions or anything like that, since all this trade is permitted", said Brian O'Toole, a former US sanctions official at the Treasury Department who is now at the Atlantic Council.

Tehran has been pressing for progress on the payment channel for months, occasionally threatening to pull out of the deal unless the European Union showed greater urgency on what is a highly technical banking and legal exercise.

Whether the limited benefits from the new INSTEX are enough to satisfy Iran are a different question.

"What's important is to show our American colleagues that we're going in the same direction on a whole range of issues like ballistic missiles, or the regional influence of Iran, even if on the nuclear agreement we have a divergence of opinion", Belgian Foreign Minister Didier Reynders told reporters on Thursday ahead of an informal ministerial meeting in Bucharest.

Iran's President Hassan Rouhani.

One big problem is different expectations.

The new European trade vehicle was conceived as a way to help match Iranian oil and gas exports against purchases of EU goods.

Despite European efforts to preserve the nuclear deal, relations between Tehran and the EU have worsened.

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