France, Germany and the UK have welcomed six more European countries to the INSTEX barter mechanism, which is designed to circumvent US sanctions against trade with Iran by avoiding the use of the dollar.

“As founding shareholders of the Instrument in Support of Trade Exchanges (INSTEX), we welcome the decision taken by Belgium, Denmark, Finland, the Netherlands, Norway and Sweden to join INSTEX as shareholders,” the three countries said in a joint statement.

Paris-based INSTEX functions as a clearinghouse that allows Iran to continue to sell oil and import other products or services in exchange. The system has not yet enabled any transactions.

In 2018, Washington unilaterally withdrew from the international agreement governing Iran’s nuclear programme and reinstated heavy sanctions against Tehran.

The 2015 deal set out the terms under which Iran would restrict its nuclear programme to civilian use in exchange for the lifting of Western sanctions. Since the US pullout, Iran has taken four steps back from the accord.

What is INSTEX?

* INSTEX will allow trade between the EU and Iran without relying on direct financial transactions.

* It will focus on humanitarian trade. It has been registered in France and will be run by German Commerzbank manager Per Fischer.

* France, Germany and the UK (known as the E3) reaffirm that their efforts to preserve the economic provisions of the Joint Comprehensive Plan Of Action (JCPOA) are conditioned upon Iran’s full implementation of its nuclear-related commitments, including full and timely co-operation with the IAEA.

What is the need for such a mechanism?

* The move will allow the EU to circumvent US sanctions in an effort to continue humanitarian trade with Iran.

* It will uphold what is left of the JCPOA, commonly known as the Iran nuclear deal.

* Recent US sanctions halted a significant portion of trade between Iran and its European partners.

Features of INSTEX

* It will support legitimate European trade with Iran, focusing initially on the sectors most essential to the Iranian population - such as pharmaceutical, medical devices and agri-food goods.

* In the long term, it aims to be open to economic operators from third countries who wish to trade with Iran and the E3 continue to explore how to achieve this objective.

* The operationalisation of INSTEX will follow a step-by-step approach: The E3 together with INSTEX will continue to work on concrete and operational details to define the way the company will operate.

* The E3 will also work with Iran to create an effective and transparent corresponding entity that is required to be able to operationalise INSTEX.

* It will function under the highest international standards with regards to anti-money laundering, combating the financing of terrorism (AML/CFT) and EU and UN sanctions compliance. In this respect, the E3 expect Iran to swiftly implement all elements of its FATF action plan.

* The new special purpose vehicle will have a supervisory board consisting of diplomats from all three countries: Miguel Berger of Germany, Maurice Gourdault-Montagne of France and Simon McDonald of Britain.

* The E3 underline their commitment to pursue the further development of INSTEX with interested European countries to make this instrument in support of trade exchanges with Iran operational by following the steps set out above.

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