Joint statement on the new mechanism to facilitate trade with Iran

Iran's Bushehr nuclear power plant

Iran's Bushehr nuclear power plant Credit Majid Asgaripour AP

Abbas Araghchi, Iran's deputy foreign minister, told Iranian state television on Thursday that he expected the payment channel to be ready for business in one or two months.

The so-called special-purpose vehicle (known as INSTEX) will help European firms with legitimate business interests to use barter techniques to conduct business in Iran.

The EU refused to follow Donald Trump a year ago in pulling out of the 2015 nuclear deal.

The plan, which had always been in the development stages, focuses on areas not targeted by USA sanctions and will in the beginning focus "on the sectors most essential to the Iranian population - such as pharmaceutical, medical devices and agrifood goods" foreign ministers from the three countries said on January 31.

The UK, Germany and France have created a new payments system to allow European businesses to trade with Iran without falling foul of United States sanctions. The entity is not likely to revive trade with Iran to begin with as its focus will primarily be food, medicine and humanitarian, with transactions small.

The EU has already spent months preparing the system and it is unlikely to become operational for several more months.

The new trade vehicle is reportedly called Instrument In Support of Trade Exchanges or INSTEX.

The U.S. Embassy in Berlin said on January 31 that the United States did not expect the mechanism to affect its effort to apply maximum economic pressure on Tehran.

According to the United Nations nuclear watchdog, the International Atomic Energy Agency (IAEA), Tehran has so far abided by the terms of the deal in regard to nuclear development despite the US withdrawal.

The payment channel allows for European countries to continue trade with Iran but could put them on a collision course with Washington.

Iran's President Hassan Rouhani. The EU this month imposed its first sanctions on Iran since the 2015 nuclear pact in reaction to Iran's ballistic missile tests and assassination plots on European soil.

The EU tried to save the nuclear deal with Iran.

"What's important is to show our American colleagues that we're going in the same direction on a whole range of issues like ballistic missiles, or the regional influence of Iran, even if on the nuclear agreement we have a divergence of opinion", Belgian Foreign Minister Didier Reynders told reporters on Thursday ahead of an informal ministerial meeting in Bucharest. It is a project of the governments of France, Germany and Britain and will receive the formal endorsement of all 28 European Union members.

France, Germany and the United Kingdom created a state company, known as a "special goal vehicle", to allow Iran to continue to trade vital goods like medicine and food, according to German media reports.

"As the president has made clear, entities that continue to engage in sanctionable activity involving Iran risk severe consequences that could include losing access to the USA financial system and the ability to do business with the United States or US companies", the State Department said in a statement.

According to media reports, INSTEX will be based in Paris and will be managed by German banking expert Per Fischer, a former manager at Commerzbank. The three European powers will be its main shareholders although they hope other member states will join.

This is a clear, practical demonstration that we remain firmly committed to the historic 2015 nuclear deal struck with Iran, the Joint Comprehensive Plan of Action, for as long as Iran keeps implementing it fully.

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