U.S. Loses Allies on Iran as Europe Launches System to Avoid Sanctions

The European Union has officially launched a special trade vehicle designed to allow limited trade with Iran while at the same time avoiding sanctions from the United States.

Following a meeting of the remaining parties to the 2015 nuclear deal that the U.S. abandoned last year, European External Action Service released a statement Friday saying that the Instrument in Support of Trade Exchanges (INSTEX) "had been made operational and available to all EU Member States and that the first transactions are being processed." The EU pledged to accelerate "cooperation with the Iranian corresponding entity (STFI)."

The move came as Iran warned it would soon begin enriching uranium beyond the deal's limits in response the EU, France, Germany and the United Kingdom's failure to normalize trade ties under threat of U.S. sanctions.

Iranian Deputy Foreign Minister Abbas Araghchi called the meeting "positive" and "a step forward," but stated that "it is still not enough and it is still not meeting Iran's expectations." Ultimately, he said, the final decision would be made back in Tehran.

iran deal europe trade
Abbas Araghchi (2ndR), political deputy at the Ministry of Foreign Affairs of Iran, and Helga Schmid (2ndL), Secretary General of the European Union's External Action Service (EEAS), take part in a meeting of the Iran nuclear deal's joint commission attended by the E3 2 (China, France, Germany, Russia, United Kingdom) and Iran on June 28 at the Palais Coburg in Vienna, Austria. The group announced that a special trade channel has been opened to allow limited dealings between Europe and the Islamic Republic. ALEX HALADA/AFP/Getty Images

The 2015 nuclear deal, officially known as the Joint Comprehensive Plan of Action (JCPOA), was the product of extensive diplomacy between the U.S. and Iran—which have not had formal relations since the Islamic Revolution deposed a West-backed monarchy in 1979—as well as China, the EU, France, Germany, Russia and the U.K. Under its terms, Iran agreed to substantially curb its nuclear activities in exchange for billions in international sanctions relief.

While the deal was largely hailed by the international community, it was widely opposed by Republicans, including Trump, as well as some U.S. allies in the Middle East, such as Israel, Saudi Arabia and the United Arab Emirates. They all criticized the deal for not going far enough in restricting Iran's nuclear capabilities, its alleged support for militant groups and its ballistic missile development.

Iran has always denied that it sought nuclear weapons and that its program was explicitly for peaceful purposes. Although the International Atomic Energy Agency repeatedly verified Tehran's compliance with the accord, Trump unilaterally pulled Washington out of the agreement in 2018, setting off a new round of tensions between the longtime rival nations.

The Trump administration has since engaged in a "maximum pressure" campaign designed to cut Iran's foreign trade ties and especially its ability to export oil. U.S. officials have threatened even their European counterparts, calling on them to forego doing business with the Islamic Republic or face punitive economic measures.

In first announcing the creation of the INSTEX system in January, however, the EU said it would be "focusing initially on the sectors most essential to the Iranian population — such as pharmaceutical, medical devices and agri-food goods," far from the influx of foreign trade promised by the JCPOA.

Since then tensions have only worsened between Washington and Tehran as the U.S. doubled down on sanctions and sent additional military assets to the Middle East amid what the administration has claimed to be a heightened threat to its regional interests posed by Iran and its allies. The U.S. has blamed Iran for recent attacks against oil tankers in the Gulf of Oman—allegations Tehran has denied—and the Revolutionary Guards' downing of a U.S. Navy RQ-4A drone nearly brought Trump to conduct strikes against the Islamic Republic last week, though he suspended the order at the last minute.

The JCPOA parties have all called for an immediate de-escalation and the issue was said to have come up repeatedly Friday in Osaka as world leaders gathered for the G20 summit, where Trump met one-on-one with a number of key stakeholders in the matter, including Russian President Vladimir Putin, Chinese President Xi Jinping and Saudi Crown Prince Mohammed bin Salman.