FILE PHOTO: An Iranian flag flutters in front of the International Atomic Energy Agency (IAEA) headquarters in Vienna, Austria…
FILE - An Iranian flag flutters in front of the International Atomic Energy Agency headquarters in Vienna, Austria, Sept. 9, 2019.

Six European nations say they will join a fledgling financial system to bypass U.S. sanctions against Iran, challenging U.S. President Donald Trump days before he meets leaders of some of those nations in London.

In a joint statement Friday, Belgium, Denmark, Finland, the Netherlands, Norway and Sweden said they are in the process of become shareholders of the Instrument in Support of Trade Exchanges (INSTEX). Britain, France and Germany launched INSTEX in January to enable companies to trade with Iran without using U.S. dollars or going through U.S. banks, thereby shielding such companies from U.S. sanctions.

Trump has been toughening U.S. sanctions against Iran since November 2018 as part of a campaign of “maximum pressure” on Tehran to reach a new deal to stop its perceived malign behaviors. Earlier last year, he pulled the U.S. out of a 2015 deal in which world powers eased sanctions on Iran in return for curbs on the Iranian nuclear program. Trump said that deal was not tough enough on Tehran.

European Union flags flap in the wind as two gardeners work on the outside of EU headquarters in Brussels, Sept. 11, 2019
FILE - European Union flags fly as gardeners work on the outside of EU headquarters in Brussels, Sept. 11, 2019.

EU commitments

The Trump administration has warned other nations not to engage in various transactions with Iran or face secondary U.S. sanctions. But the 28-member European Union has pledged to do what is necessary to uphold its nuclear deal commitments, seeing the deal as a major contributor to global nonproliferation and Mideast stability.

In their joint statement, the six European nations said: “In light of the continuous European support for the agreement and the ongoing efforts to implement the economic part of it and to facilitate legitimate trade between Europe and Iran, we are now in the process of becoming shareholders of INSTEX, subject to completion of national procedures.”

The statement did not clarify what those procedures are, or how long the six nations will take to complete them.

Britain, France and Germany have said INSTEX initially will facilitate trade with Iran in humanitarian goods, such as food, medicine and medical devices that the U.S. has declared to be exempt from its sanctions.

The three nations also have said they eventually will expand INSTEX to cover other types of trade, raising the possibility that such transactions will defy U.S. sanctions. But there have been no announcements of any companies using INSTEX to engage in humanitarian or other trade with Iran since its January launch.

U.S. Special Representative for Iran Brian Hook speaks to VOA Persian at the State Department, Nov. 18, 2019.
FILE - U.S. Special Representative for Iran Brian Hook speaks to VOA Persian at the State Department, Nov. 18, 2019.

In an interview with the Al Arabiya network earlier this month, U.S. Special Representative for Iran Brian Hook reiterated that Washington opposes the use of INSTEX for any “sanctionable activity” and has expressed that view to Britain, France and Germany. He also reiterated his skepticism that Iran will create its own INSTEX counterpart that meets international standards against money laundering and terrorism financing.

Counterpart mechanism

Iran has said it created the counterpart mechanism in April, calling it the Special Trade and Finance Instrument (STFI). But European officials have not acknowledged the establishment of any Iranian counterpart mechanism that satisfies their financial transparency requirements.

Four of the nations that agreed to join INSTEX, Belgium, Denmark, the Netherlands and Norway, are NATO allies of Washington, as are Britain, France and Germany. Trump is to meet the leaders of those seven nations at a NATO summit in London, Dec. 2-4.

The White House has said the summit will focus on the alliance’s “unprecedented progress on burden-sharing” in defense spending and the “need … to ensure its readiness for the threats of tomorrow … and those posed by terrorism.”

The State Department did not immediately respond to a VOA Persian request for comment on the decision by six more European nations, four of them NATO members, to join a financial channel that has drawn U.S. warnings against using it for sanctionable transactions.

Iran nuclear deal critic Mark Dubowitz, chief executive of the Washington-based Foundation for Defense of Democracies, dismissed the latest European announcement about INSTEX as a symbolic act with little consequence.

“As long as the Trump administration is willing to enforce U.S. sanctions, very few companies will risk punishment to process transactions through INSTEX. President Trump should make this clear when he meets his NATO counterparts in the coming days,” Dubowitz said in an email to VOA Persian. “To reinforce this message, the Treasury Department should sanction the Iranian INSTEX counterpart STFI, which is linked to several sanctioned entities.”

An FDD policy brief published in May said all of STFI’s shareholders are Iranian banks or controlled by Iranian banks that have been sanctioned by Washington for illicit activities.

Dismissive of INSTEX

Iranian officials also have been dismissive of INSTEX, complaining that its European creators have been too slow to get companies to start using it. They also have threatened to continue violating more provisions of the 2015 nuclear deal unless European powers provide Tehran with adequate economic compensation for the U.S. sanctions.

Iran has seen its currency slump and its unemployment and inflation soar under the strain of sanctions and rampant government corruption and mismanagement.

Iran so far has committed four violations of its 2015 commitments regarding the amount and quality of nuclear materials it can stockpile and produce at certain sites. The steps have slightly reduced the time it would take for Iran to accumulate enough material to make a nuclear bomb, a breakout period that was meant to be at least one year under the deal. Western powers accuse Iran of seeking nuclear weapons, a charge it denies.

French Foreign Minister Jean-Yves Le Drian, in welcoming the decision by the six other European nations to join INSTEX, echoed their call for Iran to reverse its violations of the nuclear deal in a Friday tweet. But neither he nor the other nations set a deadline for Iran to return to full compliance or warned what would happen if Tehran ignored that call.

A Nov. 24 article by Iran’s state-approved Mehr news agency cited Deputy Foreign Minister Gholamreza Ansari as saying that “despite heavy pressure and sanctions,” Iran’s trade volume with Europe in the first nine months of 2019 reached $3.8 billion, of which $3.3 billion was European exports to Iran.

Esfandyar Batmanghelidj, founder of the “Bourse & Bazaar” media company that supports business diplomacy between Europe and Iran, tweeted that European medicine exports are a significant part of that ongoing trade.

“Europe is an irreplaceable trade partner for Iran and that’s why efforts like INSTEX are so important,” he said.

This article originated in VOA’s Persian Service.