Germany, France and the UK have set up a payment channel with Iran called Instex, to help continue trade between the European countries and the Islamic Republic whilst circumventing US sanctions.

In response, the US has said that the European powers are unlikely to live up to a pledge to prevent Instex being used to launder money or finance terrorism.

Washington’s response to the European move raises the prospect of further US sanctions.

Barter-based trade

Instex is a conduit for barter-based trade with Iran and represents Europe’s effort to provide some shelter for Iran’s economy from Washington’s unilaterally imposed sanctions.

Europe is also keen to sustain the landmark nuclear power deal that Washington appears keen to walk away from.

The three European Union members want Instex to adhere to guidelines for legitimate financing set by the Paris-based Financial Action Task Force, even though Iran has yet to comply with all of those guidelines.

US suspicions

Washington’s view is that Iran would not be able to meet these guidelines because so much of the country’s economy is both opaque and connected to institutions under US sanctions such as the Iranian Revolutionary Guard Corps (IRGC).

US treasury under secretary for terrorism and financial intelligence, Sigal Mandelker, questions how Europe’s trading proposals are “even remotely possible … with a country like Iran where the IRGC is so endemic within the economy but also hidden in many different respects.” Mandelker is one of the chief architects and enforcers of US sanctions against Iran.

Iran has threatened to retaliate against the US if it continues designates the elite IRGC as a terrorist organisation.

Categories: Trade Based Financial crimes News