American officials have issued a warning to European nations that they risk falling foul of sanctions on Iran if they press ahead with a barter system that could allow the export of Iranian oil.
Last week, Russia signaled it was interested in joining the mechanism, known as Instex, as part of an effort to resuscitate a 2015 nuclear deal abandoned by President Trump last year.
The U.S. has said using the channel for food and medicine would not breach sanctions.
But a recent announcement that European ministers were considering extending it to oil risks undermining Washington’s strategy of “maximum pressure.”
A senior administration official told the Washington Examiner that the Treasury Department wrote to the board of Instex and “communicated exactly our displeasure at the creation of an instrument that, on its face, seems to foster the evasion of sanctions and the danger associated with that and reminded them what was and was not sanctionable.”
The United Kingdom, France, and Germany are intent on shoring up what is left of the 2015 accord, despite the fact that the International Atomic Energy Agency has confirmed that Iran exceeded the amount and purity of uranium it is allowed under the agreement.
Central to their efforts is the Instrument in Support of Trade Exchanges, or Instex. It was designed to avoid using international financial institutions that could be vulnerable to U.S. sanctions.
Instead, it avoids sending money to Iran by using a virtual ledger to match imports and exports. Thus, a European company wanting to import Iranian oil would pay a second European company exporting a product to Iran, such that dollars need never be sent to Tehran.
Although its three European backers say the mechanism is now operational for humanitarian goods, U.S. officials doubt that the Iranian end of the channel will ever offer sufficient transparency to make the system work.
They also say there is no need for it.
“Repeated declarations that we have not and will not sanction humanitarian trade is a sufficient opening for those who wish to do humanitarian trade with Iran,” said a second senior administration official. “So, we have never felt that this vehicle was necessary.”
Sanctions have devastated the Iranian economy since being re-imposed by the Trump administration. In June, the first month after full sanctions came into force, Iran exported 300,000 barrels of oil a day, less than half its previous low, according to officials.
At the same time, Tehran has stepped up its aggressive behavior, downing a U.S. drone in international airspace, seizing a British vessel in the Strait of Hormuz and on Friday test-launching a ballistic missile.
Two weeks ago, Federica Mogherini, the EU’s head of foreign policy, floated the possibility of expanding Instex. “The issue of whether or not Instex will deal with oil is a discussion that is ongoing among the shareholders,” she said.
The remaining signatories to the Iran deal — China, Russia, Britain, France, Germany, and the EU — are due to meet in Vienna on Sunday to discuss the next steps for the agreement.