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European Union creates system to bypass US sanctions on Iran

The financial vehicle will enable EU countries and companies to continue doing business with Iran despite American sanctions.

By Batya Jerenberg, World Israel News

The financing mechanism that would allow European companies to evade U.S. sanctions while doing business with Iran will be launched Thursday in an effort to save the nuclear deal.

According to German public broadcaster NDR, the British, German and French governments have registered a new institution, called INSTEX (Instrument in Support of Trade Exchanges), to enable European businesses to sell only food, medicine and medical devices in Iran – at least initially. However, other commodities, such as oil, may be allowed in the future.

Iran will pay for the products via barter instead of using dollars, as most of its banks, including the Iranian central bank, were cut off from the SWIFT global financial network after the U.S. pulled out from the nuclear deal with Iran last May.

The new system will be based in France with German governance and finance from all three countries. Although only the three European signatories to the Iran deal are involved, all 28 countries of the EU are expected to endorse the project during the biannual informal meeting of EU foreign ministers, which is taking place Thursday and Friday in Bucharest, Romania.

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The move has been eagerly awaited by Iran, which had threatened to dissolve the nuclear deal if a financial arrangement could not be made with Europe, as the American sanctions have bitten deeply into Iran’s economy.

It comes despite the warning by the U.S., repeated many times, not to help Iran do an end-run around the renewed sanctions. A senior administration official reiterated to the Associated Press just this past Friday that the US will hold individuals and entities accountable for undermining the administration’s efforts at reforming the Islamic regime. And many major corporations have pulled out of Iran in response to the sanctions.

It also comes despite the EU having just sanctioned Iran’s Intelligence and Security Ministry and two Iranian nationals a few weeks ago over their recent hostile activities and assassination plots on the Continent. The sanctions included freezing financial assets and imposing travel bans, in reaction to Iran allegedly murdering two of its dissidents and attempting to kill others in Denmark over the past three years.

Upon his arrival to the EU meeting in Romania, Belgian Foreign Minister Didier Reynders tried to soften this blow to American-European relations by stating that Europe is still taking seriously several areas of mutual concern regarding Iran and that no-one is forcing any business to trade with anyone.

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“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,” he said. Regarding INSTEX, he added, “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.”