As Iran presses on with its gradual dismantling of terms set by the 2015 nuclear deal, and while tensions with the U.S. increase ever higher, European signatories say a new financial mechanism can salvage the accord.
Iran's President Hassan Rouhani, right, welcomes French diplomat Emmanuel Bonne in Tehran in an image provided by the Iranian government on July 10. European nations have been working with Iran on a trade agreement.
First established in January by Britain, France and Germany, it’s headquartered in Paris and became operational last month. The mechanism avoids use of U.S. dollars.What does that mean? This way there is no direct financial flow between Iran and Europe but commodities can still travel to and from Iran.The U.S. has long used primary sanctions, such as asset freezes or trade embargoes that prevent U.S. companies from doing business in Iran.
"We’ve had clients who had transactions that weren’t problematic," he said. “But once the transactions are flagged as potentially problematic, the banks are very reluctant to process them, even if there is a good explanation, given the substantial risk in making the wrong call.” Companies doing business with INSTEX would still have to demonstrate they’ve done their due diligence on who the end-user in Iran will be, said Esfandyar Batmanghelidj, an Iran expert and founder of the media company Bourse and Bazaar.
With previous administrations, even when a severe sanctions regime like the one on Iran was in place, U.S. officials would make efforts to keep permissible trade “not just permissible but practically possible,” said Blanc.
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