Three major European countries have set up a financial mechanism aimed at circumventing U.S. sanctions on Iran and keeping the 2015 Iran nuclear deal alive, a joint statement by the E3 said.
The UK, Germany and France, all of which opposed President Donald Trump’s withdrawal from the nuclear agreement last year, have been working for months to establish their own trade channel allowing them to continue trading with Iran, which has been made difficult under some of the U.S. sanctions.
The new mechanism known as Instrument for Supporting Trade Exchanges (INSTEX) is, in fact, a “mechanism for facilitating legitimate trade between European entities and Iran,” said the UK Foreign Office.
In the beginning, it would only apply to food, pharmaceuticals and foodstuffs, which are not subject to sanctions, but there is a possibility that the channel is expanded in the future. However, oil, which is Iran’s main source of foreign exchange, will not be covered.
“We have been looking for ways to obtain this agreement because we are firmly convinced that it serves our strategic security interests in Europe,” said German Foreign Minister Heiko Maas on Thursday. “We do not want Iran to get out of this agreement and back into uranium enrichment. This has to do with our security interests in Europe,” he added during a press briefing in Brussels earlier in the day.
German broadcaster NDR said the “special-purpose vehicle” INSTEX will be based in Paris and managed by a German banking expert. It will become fully operational later this year and will mostly benefit small- and medium-sized firms with no links in the United States.
A spokesperson for the State Department said later in the day that it was “closely following” reports on INSTEX.
“As the president has made clear, entities that continue to engage in sanctionable activity involving Iran risk severe consequences that could include losing access to the U.S. financial system and the ability to do business with the United States or U.S. companies.”
Many large European businesses have already cut links with Iran for fear of repercussions and it remains to be seen whether other companies will be willing to accept the new payment channel.