(Bloomberg) -- Treasury Secretary Steven Mnuchin made clear that participating in the U.S. financial system means abiding by its sanctions amid a European effort to sidestep American economic pressure on Iran to continue trade.
Germany, France and the U.K. created a financing vehicle known as Instex in January to allow companies to do some trade with Iran without the use of U.S. dollars or American banks -- thus allowing them to get around wide-ranging American sanctions that were imposed after the Trump administration abandoned the 2015 Iran nuclear deal last year.
“We’ve been very clear that we expect U.S. sanctions to be adhered to,” Mnuchin said in response to questions from reporters on Thursday in France where he met with Group of Seven counterparts. “Whether it’s Iran or anyone else, if people want to participate in the dollar system people will be obligated to follow the U.S. sanctions.”
He said that Instex should be “careful on diligence.”
Treasury’s top sanctions official, Sigal Mandelker, sent a letter in May warning European allies not to violate sanctions through Instex. Mnuchin confirmed that a letter was sent.
European countries broadly opposed Trump’s decision to withdraw from the nuclear accord but have struggled to deliver the economic benefits Iran expected from the deal, known as the Joint Comprehensive Plan of Action, since the U.S. quit. In the meantime, U.S. sanctions have delivered a blow to Iran’s economy, fueling inflation, reducing oil revenue and pressuring President Hassan Rouhani’s government. Instex was supposed to help address that, but so far it has largely failed to get up and running.
Frustrated at the U.S. withdrawal and stalled European efforts, Iran has already breached some of the limits on its nuclear program imposed under the deal, and has warned European governments that it will give up on the accord entirely unless they can find some way to work around the U.S. sanctions.
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