Europe seeks barter system with Iran to offset US sanctions

PARIS: A European trade mechanism to barter humanitarian and food goods with Iran will not work until Tehran sets up a mirror company and meets international standards against money-laundering and terrorism financing, a French diplomatic source said.

Britain, France and Germany, parties to a 2015 nuclear deal with Iran along with the United States, China and Russia, are determined to show they can compensate for last year’s US withdrawal, salvage trade promised to Iran under the accord and still prevent Tehran developing a nuclear bomb capability.

French President Emmanuel Macron has led those efforts and is trying to clinch a $15 billion credit line that would offset tough US sanctions that have strangled Iran’s oil exports, but that requires geting some backing from Washington.

In addition to that the Europeans have atempted for more than a year to set up the Instex trade mechanism, but it is still not operational. It would initially only deal with food and medical trade not Iran’s principal export - crude oil.

“The Iranian mirror structure is not operational. The day they have signed the necessary FATF (Financial Action Task Force) conditions we’ll talk about it and the day that we are sure that the first transactions through Instex aren’t put under American sanctions, (then) we’ll talk about it again,” the diplomatic source said.

France’s foreign minister said on Tuesday the mirror company had not been set up.

But the clock is ticking - Iran’s president on Wednesday gave Europe another two months to save the deal and warned Tehran was preparing for further significant breaches of the accord’s caps on nuclear activity if diplomatic efforts ultimately failed.

European officials until now have said that conforming to Paris-based FATF rules was not a prerequisite for Instex, although it would facilitate its establishment.

Iran’s parliament has approved some new measures against funding terrorism under pressure to adopt international standards.