Europe Launches Sanctions-Busting Iran Payment Vehicle

Britain, France and Germany will launch a special payment mechanism Thursday that the EU hopes will help save a nuclear deal with Iran by bypassing U.S. sanctions, European sources told AFP.

The entity, registered in France with German governance and finance from all three countries, will allow Iran to trade with EU companies despite Washington reimposing U.S. sanctions after President Donald Trump pulled out of the 2015 accord.

The three countries -- the European signatories to the landmark deal that curbed Tehran's nuclear ambitions in return for sanctions relief -- are expected to launch the device, which has been in preparation for months.

U.S. officials said they were following the situation but dismissed the idea that the new entity would have any impact on efforts to exert economic pressure on Tehran.

While the new institution, called INSTEX -- short for Instrument in Support of Trade Exchanges -- is a project of the three governments, it will receive the formal endorsement of all 28 EU members.

The company was registered in Paris on Tuesday with 3,000 euros capital and a supervisory board with members from France and Germany, and chaired by a Briton.

The formal announcement is expected to be made on Thursday afternoon by the German, French and British foreign ministers in Bucharest.

EU diplomatic chief Federica Mogherini, who has led the bloc's efforts to save the Iran nuclear deal, said she welcomed the creation of INSTEX.

"This step... the establishment of the special purpose vehicle, is I believe the mechanism that will allow legitimate trade with Iran to continue as foreseen in the nuclear agreement. So full support from our side," she told reporters.

- Transatlantic discord -

Washington has warned the EU against trying to sidestep its sanctions on Tehran, while the Europeans -- along with the deal's other signatories Russia and China -- say Iran has not broken its side of the nuclear accord and should be allowed to trade.

Joseph Giordono-Scholz, spokesman for the U.S. embassy in Berlin, said the United States was "closely following" reports on INSTEX but said it would not weaken its campaign against Tehran.

"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," he said.

"We do not expect the SPV will in any way impact our maximum economic pressure campaign."

The U.N. atomic agency has certified Iran's compliance with its obligations 13 times and even the head of the CIA said this week that Tehran was abiding by the accord -- drawing a furious response from Trump.

The EU has growing concerns about Tehran's ballistic missile program, as well as its human rights record, its interference in Middle East conflicts and recent attempted attacks against opposition groups in Europe.

Washington has warned it will vigorously pursue any company breaching its sanctions against the Islamic republic and a number of major international corporations have already pulled out.

Mogherini insisted transatlantic ties were not threatened by the discord over Iran, saying Brussels was in regular contact with the U.S. to discuss concerns about Tehran's activities.

Belgian Foreign Minister Didier Reynders said that despite differences over the nuclear deal, Europe shared many of Washington's concerns about Iran.

"It's essential we show our American colleagues that we are going in the same direction as them on a series of issues such as ballistic missiles and Iran's regional activities," Reynders said as he arrived for the EU foreign ministers meeting.

On the INSTEX project, he said that "at the end of the day it will be companies that decide whether or not they want to work in Iran, bearing in mind the risk of American sanctions."

The new European scheme was originally intended to allow Iran to sell oil to the EU on a barter basis but, with Europe now buying very little Iranian crude, it is now aimed at small- and medium-sized companies. 

"We'll have to wait and see who uses it," a European source said.