Europe sets up scheme to get round US sanctions on Iran - Politics | PoFo

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This is a scheme set-up by Britain, France and Germany and is set to be endorsed by the entire EU today.

The Guardian wrote:Europe sets up scheme to get round US sanctions on Iran
Vehicle to be used for humanitarian supplies, then expanded to help firms trade

France, Germany and Britain have set up a financial mechanism designed to avoid US sanctions against Iran and keep the 2015 nuclear deal afloat.

Through the Instex trade vehicle they hope to assert European economic sovereignty in the face of Washington’s determination to impose its foreign policy on Europe.

The strategy would initially focus on trying to ease the flow of humanitarian supplies to Iran, the German foreign minister, Heiko Maas, said. Such supplies, including medicines and foodstuffs, are not supposed to be subject to US sanctions.

Eventually, the plan is for the vehicle to expand to allow European firms to trade more freely with Iran in a range of goods, including those subject to US sanctions, the EU foreign affairs chief, Federica Mogherini, said.

Instex, which stands for “instrument for support of trade exchanges”, was registered this week, and will act as a proposed payment channel from Europe to Iran, and vice versa. It will not be fully operational until later this year. Iran will be expected to established a parallel organisation. If the scheme works, it is likely to be most useful to small and medium-sized firms with no links in the US.

The body is being designed and run by Britain, France and Germany but will receive the endorsement of the entire EU on Thursday. Further details are expected to be unveiled at meeting of European foreign and defence ministers in Bucharest.

The EU refused to follow Donald Trump last year in pulling out of the 2015 nuclear deal. Washington says that, although Iran has met the terms, the accord was too generous, failing to rein in Iran’s ballistic missile programme or curb its regional meddling.

Ever since, European firms have been faced with ever more assertive, and broadly effective US treasury measures to scare them off trading with Iran. Many multinationals have pulled investments from Iran, plunging an already struggling Iranian economy into further difficulty.

Tehran has been pressing for progress on the payment channel for months, occasionally threatening to pull out of the deal unless the EU showed greater urgency on what is a highly technical banking and legal exercise.

A key question is whether the US will see Instex, as initially constructed, as a legitimate target for sanctions by the US treasury, since it has warned any European entity trading with Iran with US connections or using dollars can be subject to punitive fines.

Instex’s initial purpose of easing the flow of supplies such as food and medicines to Iran might protect the body since the US sanctions net is not meant to extend to humanitarian supplies.

In 2017, the export of drugs from Europe to Iran was worth $884m compared with $194m from China and $52m from India, according to UN data.

Esfandyar Batmanghelidj, founder of a Europe-Iran business forum said, even if limited, the mechanism could eventually pave the way for something more ambitious.

“It could turn into a pilot that the US would find difficult to target with political legitimacy given its humanitarian focus,” he said.

The US embassy in Berlin said that Washington did not expect the payment system to reduce economic pressure on Iran. An embassy spokesperson repeated Trump’s threat that all who continued to do business with Iran would be subject to US sanctions.

A high-level European diplomatic representation on the Instex supervisory board may act as a firewall preventing the Trump administration from imposing sanctions.

Iran’s deputy foreign minister Abbas Araqchi said the success of the vehicle would depend on expert meetings that Iran would subsequently have with the Europeans, including between central banks.

With the UK planning to leave the EU, London is less motivated than French and German politicians to see the vehicle as the start of a wider drive to establish a euro-based rival for the dollar. The French finance minister, Bruno Le Maire, has repeatedly called for greater European autonomy, and the EU is studying plans to challenge dollar dominance.
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