European countries set up payment channel with Iran to bypass United States sanctions

Iran's Deputy Foreign Minister Abbas Araghchi who is also a senior nuclear negotiator speaks with media in his press conference in Tehran Iran

The UK, Germany and France have created a new payments system to allow European businesses to trade with Iran without falling foul of USA sanctions.

Europe's new special goal vehicle, called the Instrument in Support of Trade Exchange (INSTEX), is registered in France and will be headed by German banker Per Fischer, a former Commerzbank director, Reuters reported on Thursday.

With the United Kingdom 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.

Following the U.S. withdrawal from the Iranian nuclear deal and re-imposing of the American sanctions against Tehran, the EU attempted to create the Special Purpose Vehicle in a bid to give European companies a way to trade with the Islamic Republic without being threatened by USA sanctions.

The idea behind the SPV is to have it act as a clearing house into which buyers of Iranian oil would pay, allowing the European Union to trade oil with Iran without having to directly pay the Islamic Republic.

The new European scheme was originally meant to allow Iran to sell oil to the EU on a barter basis but, with Europe now buying very little Iranian oil, it is now aimed at small and medium-sized companies. "I hope we can also find a solution for this vehicle". Iran's deputy foreign minister said Thursday, Jan 31, 2019, that he believes European Union nations soon will announce they've created a program for Iran to continue trade there and avoid re-imposed USA sanctions over its nuclear program.

The company's formal objectives are to "support legitimate trade with Iran", according to the entry in Petites Affiches, a French journal for official corporate announcements. It will not be used for oil-related transactions that have been hit hard by United States sanctions.

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 us pulled out from the nuclear deal with Iran last May.

The three main European powers are also assessing whether to push for new sanctions on Iran over its ballistic missile programme, diplomats have told Reuters.

The EU's recent decision to impose its first sanctions since the 2015 deals, in reaction to Iran's ballistic missile tests and assassination plots in Europe, are also unlikely to soften the mood in Tehran.

The US state department said it would fail, however.

Iran's deputy foreign minister Abbas Araghchi hailed INSTEX as "the first step within the set of commitments the Europeans have made to Iran" but said that to be of any value, it must allow trading of sanctioned goods. Under Donald Trump, however, the White House reimposed travel restrictions for United States citizens, making it much harder for Americans to travel to the island.

"If we can not sell our oil and we don't enjoy financial transactions, then I don't think keeping the deal will benefit us anymore", Ali Akbar Salehi, head of the Atomic Energy Organization of Iran, said earlier in January.

Iran has threatened to pull out of the deal unless the European powers make it possible for it to receive economic benefits.

Iranian President Hassan Rouhani (C) during a ceremony to mark National Nuclear Technology Day in Tehran on April 9, 2018.

Iran is also looking to Russian Federation and China, the other signatories to the nuclear accord, to maintain trade flows in defiance of the United States.

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