European governments will provide a credit line to help a special mechanism establish a route for trade between Iran and the West, a report said.
France, Britain and Germany are set to announce by Friday that they will provide a capital injection of at least a few million euros to provide INSTEX with a credit line to hasten the first transactions, The Wall Street Journal reported on Thursday.
INSTEX is planned to be based in Paris and be managed by a German banking expert. Britain will head the supervisory board.
It was established in January but was not operational and had carried out no transactions. Initially, European companies will be focused on trading humanitarian products like medicine, medical devices and food, which are not targeted by US sanctions.
On Tuesday, European Union foreign policy chief Federica Mogherini said INSTEX was ready to be deployed. A formal announcement of this is expected in coming days, officials said.
The trade mechanism is designed to allow European companies which import Iranian goods to effectively pay European companies exporting goods to Iran, with INSTEX ensuring that payments are correctly offset.
However, one of the many technical problems facing INSTEX has been how to get it up and running since, at first, there might only be a few transactions and European imports may not offset the value of European exports to Iran. With the governments providing capital to INSTEX, the company could advance payments to European exporters to help get around that initial problem.
Iranian officials have been demanding that INSTEX show results soon, and European officials have said they hope the first transactions can take place over the next few weeks.
US officials largely have been dismissive of the European trade mechanism. However, some US lawmakers have called for sanctions to be prepared either against INSTEX or against a mirror Iranian company which is supposed to net out Iranian exports and imports in a similar way.
“I believe that this is now ready for being operational, and I hope that this is something that can help keep Iran compliant with the agreement (2015 Iran nuclear deal) as it has been so far,” Mogherini said of INSTEX on Tuesday.
Iran has warned it will exceed the nuclear deal’s cap on its stockpile of enriched uranium on Thursday if the EU fails to honor its obligations under the international agreement.
On Friday, senior diplomats from the EU, France, Germany, Britain, Russia, China and Iran will meet in Vienna to discuss concerns about the nuclear deal.
The US special representative for Iran, Brian Hook, will meet with European officials in Paris on Thursday.
On May 8, 2018, US President Donald Trump pulled his country out of the nuclear deal between Tehran and world powers, known as the Joint Comprehensive Plan of Action (JCPOA).
Following the US withdrawal, Iran and the remaining parties launched talks to save the accord.
The European Union has vowed to counter Trump’s renewed sanctions on Iran, including by means of a new law to shield European companies from punitive measures, but it has so far failed to do anything beyond making statements.