After months of deliberations, European countries have set up the special payment channel to handle trade with Iran that would allow transactions with Iran, including oil, as the European Union (EU) still works to salvage the nuclear deal with Iran, German broadcaster NDR reported on Thursday.
Germany, France, and the UK have created the payment channel-
'Instrument in Support Of Trade Exchanges' (INSTEX)-which will be an alternative channel for transactions with Iran. INSTEX will be based in Paris and managed by an experienced German banker, while the UK will chair the vehicle's supervisory board, according to the German broadcaster.
Months before the U.S. sanctions on Iran's oil returned, the EU pledged to create a new payment system, the so-called special-purpose vehicle (SPV), that "will assist and provide reassurance to European businesses wishing to continue trading with Iran, mitigating the effect of re-imposed US sanctions, in accordance with European Law."
The idea behind the SPV is to have it act as a clearing house into which buyers of Iranian oil would pay, allowing the EU to trade oil with Iran without having to directly pay the Islamic Republic.
Still, the bloc had been struggling for months with the set-up of such a vehicle because no EU member was willing to host it for fear of angering the United States, the Financial Times reported a week before the American sanctions on Iran returned.
The EU hoped that the payment mechanism would be legally in place by the time the U.S. sanctions on Iran returned, but the vehicle was not expected to be operational until early this year.
This week, on Monday, Germany's Foreign Minister Heiko Maas said that the vehicle "will be registered, it has not yet been registered, but I would say that the implementation of our plan is imminent," the AP reported.
The French Foreign Ministry told CNN on Thursday that a joint statement regarding the payment vehicle would be sent out later in the day when the foreign ministers of the EU meet in Romania's capital Bucharest.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More