The United States is “fine” with a European trade mechanism that would allow trade with Iran to continue without falling foul of American sanctions, the US State Department said.
State Department spokeswoman Morgan Ortagus said in Washington on Monday that “any payment systems in which there are goods or services, or whatever the commodity might be, that is not sanctioned by the US government is fine.”
Ortagus, however, noted that the US “would not support any payment mechanism from any country in the world that would allow businesses or entities or countries to engage in transactions with Iran that are sanctioned entities.”
France, Britain and Germany have set up a special-purpose vehicle called INSTEX, designed to allow payments to Iran that would legally bypass US sanctions which were reinstated after Washington abandoned Tehran’s nuclear deal with world powers a year ago. INSTEX has yet to become operational.
German Foreign Minister Heiko Maas said in Tehran on Monday that the three European signatories to the nuclear deal are determined to stick to their commitments from the 2015 agreement.
“We want to fulfil our obligations,” he said. “We cannot work miracles, but we will try to avert a failure (of the nuclear deal),” Maas told a joint news conference with his Iranian counterpart Mohammad Javad Zarif.
Iran signed the landmark accord with China, Russia, Germany, Britain, France and the United States, leading to sanctions relief in exchange for Tehran curbing its nuclear program.
But the US administration of President Donald Trump has imposed sweeping sanctions on Iran and, according to Tehran, waged an “economic war” against it after walking away from the deal.
Maas acknowledged the economic benefits Tehran hoped for from the deal were now “more difficult to obtain” but urged Iran to fully respect the agreement.
“This is an instrument of a new kind, so it’s not straightforward to operationalize it,” Maas said. “But all the formal requirements are in place now, and so I’m assuming we’ll be ready to use it in the foreseeable future.”
The three EU members want INSTEX to meet norms for legitimate financing set by the Paris-based Financial Action Task Force, even though Iran as a country is not yet fully compliant with them.
US weighing sanctions on trade vehicle
Meanwhile, Bloomberg reported on Monday that the Trump administration is weighing sanctions on Iran’s counterpart to the European special-purpose vehicle.
The financial news provider quoted a senior administration official as saying that the latest measures will target the Special Trade and Finance Institute, which Iran set up to correspond to Europe’s INSTEX in bypassing sanctions.
The US government is targeting Iran’s Special Trade and Finance Institute (STFI) on the ground that the country has not implemented global safeguards against money laundering and terrorism financing, Bloomberg cited the unnamed official as saying.
It said punishing STFI could doom INSTEX because it raises the possibility of sanctions risk to anyone who is part of the European mechanism.
The initiative, it said, drives home a letter sent by the US Treasury Department in early May to Per Fischer, the president of INSTEX, arguing that the financial body could face sanctions.
“If they are looking at sanctioning STFI, you’re essentially trying to kill INSTEX through the back door,” said Ellie Geranmayeh, a senior policy fellow at the European Council on Foreign Relations.
The Europeans say INSTEX will apply initially only to non-sanctionable essential goods, such as humanitarian, medical, and farm products.
They have said it will function under the highest international standards with regard to anti-money laundering mechanisms, combating the financing of terrorism as well as EU and UN sanctions compliance.
US authorities are reportedly worried that other nations, including America’s adversaries, could use INSTEX as a model in the future and avoid the US financial system entirely.
“The development of INSTEX is really worrying for US sanction policy in the long run,” Emma Ashford, a research fellow at the Cato Institute in Washington, told Bloomberg. “INSTEX sets up a framework other countries can use in the future.”
According to Suzanne Maloney, deputy director of the foreign policy program at the Brookings Institution, Washington’s bid to crush INSTEX “does call into question what the long-term strategy here is” with the US sanctions.
“If there’s no room for humanitarian aid for Iran, literally no viable mechanisms for facilitating those transactions, then clearly this is purely a punitive strategy and one that is intended to wreak maximum havoc on the Iranian population.”
The trade of humanitarian goods, such as food, medicine and medical devices, is theoretically allowed by the US, but European companies refuse to do business with Iran, fearing secondary American sanctions.
Reuters, AFP and Press TV also contributed to this story.