Iran says European plan to bypass US sanctions falls short

The mechanism set up by European powers to help Iran skirt US sanctions will be of limited use but it has highlighted a welcome distance between Washington and its allies, Tehran's top diplomat said Monday. The EU said Friday after a crisis meeting aimed at salvaging a landmark 2015 nuclear deal between Tehran and world powers that the INSTEX payment mechanism was finally "operational" and that the first transactions were being processed.

"Although it does not meet the demands of the Islamic Republic, (or) Europeans' obligations... it has a strategic value (in showing) that the closest allies of the United States are distancing themselves from America in their economic relations," Foreign Minister Mohammad Javad Zarif said. "This will certainly have long-term effects," he added, during a speech broadcast on state television.

Britain, France and Germany launched the special payment system in late January after US President Donald Trump abruptly quit the nuclear deal last year and reimposed sweeping sanctions on Iran. It is seen as key to EU efforts to preserve the deal but its promise of easing the bite of US sanctions, which have cut Iran off from the international financial system and decimated its oil exports, has been slow to materialise.

In response to the US measures, Tehran announced in May it would abandon some of the limits on its nuclear activities imposed under the deal, threatening to give up two others by July 7 if the other signatories to the accord do not help it break the US embargo. INSTEX was designed to only support transactions in the pharmaceutical, medical and agricultural-food sectors.