European countries set up payment channel with Iran to bypass US sanctions

Germany, France and Britain have been working for months to establish a measure allowing payments between Europe and Iran to continue, in the wake of the US withdrawal from the nuclear agreement in May.

Now the European countries have officially established that channel, named INSTEX -- an acronym for Instrument in Support Of Trade Exchanges -- NDR reported Thursday, in a move likely to displease Washington.

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"We have been looking for ways to obtain this agreement because we are firmly convinced that it serves our strategic security interests in Europe," German Foreign Minister Heiko Maas said during a press briefing in Brussels.

"We do not want Iran to get out of this agreement and back into uranium enrichment. This has to do with our security interests in Europe," he said.

Maas added that Germany was "working very closely" with France, Britain and the European Union to "implement this special-purpose vehicle."

For its part, the French Foreign Ministry told CNN a joint statement would be sent out later Thursday when EU foreign ministers meet in Bucharest.

According to the NDR report, INSTEX will be based in Paris and managed by a German banking expert. A supervisory board will be run out of the UK.

The announcement comes just over three years after the Iran nuclear deal came into effect, limiting the country's nuclear program in return for sanctions relief.

But the Obama-era agreement was torn apart in May last year after long-time critic US President Donald Trump announced his country would be quitting the deal -- much to the dismay of European partners.

Shortly after, the US reimposed sanctions against Iran and Trump warned countries against doing business with it.

The US withdrawal and ensuing sanctions have hit the Iranian economy hard, with the collapse of the rial leading to widespread shortages -- including medical medical supplies and equipment.

The INSTEX channel will be used by Europe to sell only food, medicine and medical equipment to Iran, with the possibility of expanding in the future, NDR reported.

The channel is likely to ease relations between Europe and Iran, which had become strained recently amid Iran's ballistic missile program and attacks against Iranian dissidents in Europe.

How willing European companies will be to take up the new payment channel remains to be seen, with many larger European businesses already cutting back or eliminating links with Iran for fear of US sanctions.

CNN's Nadine Schmidt reported from Berlin, Sheena McKenzie wrote in London. Sara Mazloumsaki, Saskya Vandoorne and Claudia Otto contributed to this report.

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