EU launches mechanism to bypass US sanctions on Iran

EU launches mechanism to bypass US sanctions on Iran

The European Union has announced the setting up of a payment mechanism to secure trade with Iran and skirt US sanctions after Washington pulled out of the landmark nuclear deal last May, Al Jazeera reports.

The proposal of a financial instrument has been a key element in the EU's strategy to keep Iran from quitting the 2015 nuclear agreement, which was signed to prevent Tehran from building nuclear weapons in exchange for sanctions relief.

The new institution, named INSTEX - Instrument In Support Of Trade Exchanges - will allow trade between the EU and Iran without relying on direct financial transactions. It is a project of the governments of France, Germany and Britain and will receive the formal endorsement of all 28 EU members.

The administration of US President Donald Trump has been closely eyeing European efforts to establish the financial mechanism and warned any attempt to evade its "maximum pressure" campaign on Iran would be subject to stiff penalties.

The mechanism is the first concrete step by the EU to counter Trump's unilateral decision to withdraw from the nuclear deal. 

Iran and EU announced the plan to set up a legal entity in September last year to circumvent US sanctions, which has largely succeeded in preventing European firms from investing in the country.

On Thursday, Iran's Deputy Foreign Minister for Political Affairs said the Special Purpose Vehicle will serve as the first step in the collection of commitments of Europeans towards Tehran.

"We hope they will be fully implemented and will not be incomplete," Abbas Araqchi told the Islamic Republic of Iran's Broadcasting (IRIB) Channel One on Thursday.