Europe set to announce plan letting Iran bypass U.S. sanctions

Iran's Bushehr nuclear power plant

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 US sanctions, European sources told AFP.

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.

Speaking at a meeting of European Union foreign ministers in Bucharest Mr Hunt said the Iran nuclear deal remained "central to global efforts to halt nuclear proliferation and is crucial for the security of the region".

The channel, set up by Germany, France, and the United Kingdom, is called INSTEX - short for "Instrument in Support of Trade Exchanges".

The Europeans say the first goods that Iran will receive include drugs and medical devices, which Iran needs.

Foreign Secretary Jeremy Hunt said initially the new payment system would only apply to food, pharmaceuticals and consumer goods, which are not subject to sanctions. "This has to do with our security interests in Europe", he said. But the initiative, of modest economic value if big political symbolism, is unlikely to do much to placate Tehran's pleas for economic dividends from staying in the deal.

In a move sure to unleash fury from the Trump administration, the European Union has announced it has set up a transactions channel with Iran to bypass USA sanctions.

USA 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. It is not expected to address oil-related transactions, which have dropped off since a year ago and are Iran's primary source of foreign currency. "For many companies, the possibility of being blocked from their us customers outweighs any opportunities in the Iranian market".

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The spokesperson added, "We do not expect the SPV will in any way impact our maximum economic pressure campaign". The move, which will reportedly be announced later on Thursday, would nearly certainly infuriate the USA, as it would allow the bypassing of American sanctions on Iran.

Tehran has grown frustrated with the slow European response to the reimposition of U.S. sanctions, but has pledged to maintain its nuclear deal commitments so long as it receives the promised economic benefits.

The UN 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 new entity acts as a sort of euro-denominated clearing house for Iran to conduct trade with European companies.

And another, Foad Izadi, professor at the University of Tehran, echoed what is a common sentiment among Iran's leaders: "I don't think the EU is either willing or able to stand up to Trump's threat", and continued, "The EU is not taking the nuclear deal seriously and it's not taking any action to prove to Iran otherwise..."

New US sanctions have largely succeeded in persuading European companies to abandon plans to invest in Iran.

However, relations between Tehran and the EU have worsened, and the EU this month imposed its first sanctions on Iran since the 2015 deal in reaction to Iran's ballistic missile tests and assassination plots on European soil.

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