BUCHAREST: Britain, France and Germany launched a special payment mechanism on Thursday that the EU hopes will help save a nuclear deal with Iran by bypassing US sanctions, European sources said.

The entity, registered in France with German governance and finance from all three countries, will allow Iran to trade with EU companies despite Washington reimposing US sanctions after President Donald Trump pulled out of the 2015 accord.

The three countries — the European signatories to the landmark deal that curbed Tehran’s nuclear ambitions in return for sanctions relief — are expected to launch the device, which has been in preparation for months.

US officials said they were following the situation but dismissed the idea that the new entity would have any impact on efforts to exert economic pressure on Tehran.

While the new institution, called INSTEX — short for Instrument in Support of Trade Exchanges — is a project of the three governments, it will receive the formal endorsement of all 28 EU members.

The company was registered in Paris on Tuesday with 3,000 euros capital and a supervisory board with members from France and Germany, and chaired by a Briton.

The formal announcement is expected to be made on Thursday afternoon by the German, French and British foreign ministers in Bucharest.

EU diplomatic chief Federica Mogherini, who has led the bloc’s efforts to save the Iran nuclear deal, said she welcomed the creation of INSTEX.

“This step... the establishment of the special purpose vehicle, is I believe the mechanism that will allow legitimate trade with Iran to continue as foreseen in the nuclear agreement. So full support from our side,” she told reporters.

Washington has warned the EU against trying to sidestep its sanctions on Tehran, while the Europeans — along with the deal’s other signatories Russia and China — say Iran has not broken its side of the nuclear accord and should be allowed to trade.

Joseph Giordono-Scholz, spokesman for the US embassy in Berlin, said the United States was “closely following” reports on INSTEX but said it would not weaken its campaign against Tehran.

“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 US financial system and the ability to do business with the United States or US companies,” he said.

Published in Dawn, February 1st, 2019