The UK, Germany and France have created a new payments system to allow European businesses to trade with Iran without falling foul of USA sanctions.
So the Europeans have for months been trying to work out a "special objective vehicle" to allow the continuation of trade with Iran.
"We have been looking for ways to obtain this agreement because we are firmly convinced that it serves our strategic security interests in Europe", German Foreign Minister Heiko Maas said during a press briefing in Brussels. Such supplies, including medicines and foodstuffs, are not supposed to be subject to United States sanctions.
New US sanctions have largely succeeded in persuading European companies to abandon business with Iran, and Washington said on Thursday that it did not expect the EU effort, known as the Special Purpose Vehicle (SPV), to change that. Americans, wherever in the world they might be, are banned from "new investment" in the war-torn country, according to the US Treasury.
As the European signatories to the nuclear accord, Germany, France and Britain set up and will manage the clearing house.
The announcement is expected to be made Thursday as European Union foreign ministers are meeting in Bucharest, Romania.
The EU refused to follow Donald Trump previous year in pulling out of the 2015 nuclear deal.
Washington says that, although Iran has met the terms, the accord was too generous, failing to rein in Iran's ballistic missile program or curb its regional meddling. Iran hoped that signing the deal would lead to an influx of big-ticket European investments in areas such as energy, aviation, and industry, Reynolds said, while European leaders are aware that their blue-chip companies are loath to risk US sanctions by heading to Iran.
According to the United Nations nuclear watchdog, the International Atomic Energy Agency (IAEA), Tehran has so far abided by the terms of the deal in regard to nuclear development despite the USA withdrawal.
"We have begun a hard dialogue with Iran. and unless progress is made we are ready to apply sanctions, firmly, and they know it", French Foreign Minister Jean-Yves Le Drian said on Friday.
Instex's initial objective of easing the flow of supplies such as food and medicines to Iran might protect the body since the USA sanctions net is not meant to extend to humanitarian supplies. "The goal of this mechanism is so that all of the receipts and payments between Iran and Europe, imports and exports, go through this mechanism". For now, the non-dollar trade is said to be limited to humanitarian goods only.
A U.S. Embassy spokesperson in Germany warned that companies engaging in "sanctionable activity involving Iran risk severe consequences" but said the new organization would not in any way affect the U.S. campaign to apply maximum financial pressure on Iran.
"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 USA financial system and the ability to do business with the United States or U.S. companies", a spokesman for the embassy said.
A high-level European diplomatic representation on the Instex supervisory board may act as a firewall preventing the Trump administration from imposing sanctions.
Belgian Foreign Minister Didier Reynders said that despite differences over the nuclear deal, Europe shared many of Washington's concerns about Iran.
INSTEX, which is unlikely to be operational for another few months, is to have its headquarters in Paris and will be run by a German banker.