BICOM

The UK, France and Germany yesterday announced that they have created a “special purpose vehicle” to help European companies doing business with Iran avoid US sanctions.

The payment channel, also known as the Instrument in Support of Trade Exchanges, or INSTEX, was registered in Paris using the address of the French Ministry of Economy and Finance. Iranian Deputy Foreign Minister Abbas Araghchi told state television it was: “A first step taken by the European side … We hope it will cover all goods and items.”

The official announcement was made by French Foreign Minister Jean-Yves Le Drian, German Foreign Minister Heiko Maas and British Foreign Secretary Jeremy Hunt in Bucharest, where they were attending a meeting of EU foreign and defence ministers. A joint statement from all three read: “INSTEX will support legitimate European trade with Iran, focusing initially on the sectors most essential to the Iranian population – such as pharmaceutical, medical devices and agri-food goods. INSTEX aims in the long term to be open to economic operators from third countries who wish to trade with Iran and the E3 continue to explore how to achieve this objective.”

Jeremy Hunt said: “Today we have taken a significant step forward in delivering our commitment under the Iran nuclear deal to preserve sanctions relief for the people of Iran. This is a clear, practical demonstration that we remain firmly committed to the historic 2015 nuclear deal struck with Iran.”

INSTEX will facilitate business deals with Iran without using the dollar or the US financial system and will structure sales as indirect transactions — steps that the Europeans believe will technically avoid violations of the US sanctions. While INSTEX allows European countries to continue to trade with Iran, it could put them on a collision course with Washington. President Trump withdrew from the Iran nuclear deal last May and re-imposed sanctions shortly thereafter.

The US State Department said it was “closely following” the news and released a statement that said: “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 US financial system and the ability to do business with the US or US companies.”