Europe Activates "INSTEX" to Trade with Iran; US Threatens Sanctions - EUROPE THREATENS TO PULL ALL FUNDS FROM U.S. BANKS!

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With the world waiting for the first headlines from the Trump-Xi meeting, the most important and unexpected news of the day hit moments ago, when Europe announced that the special trade channel, Instex, that will allow European firms to avoid SWIFT and bypass American sanctions on Iran, is now operational.

Following a meeting between the countries who singed the Iran nuclear deal, also known as the Joint Comprehensive Plan of Action (JCPOA), which was ditched by US, French, British and German officials said the trade mechanism which was proposed last summer and called Instex, is now operational.

As a reminder, last September, in order to maintain a financial relationship with Iran that can not be vetoed by the US, Europe unveiled a "Special Purpose Vehicle" to bypass SWIFT. The mechanism would facilitate transactions between European and Iranian companies, while preventing the US from vetoing the transactions and pursuing punitive measures on those companies and states that defied Trump. The payment balancing system will allow companies in Europe to buy Iranian goods, and vice-versa, without actual money-transfers between European and Iranian banks.

The statement came after the remaining signatures of JCPOA gathered in Vienna for a meeting that Iranian ministry spokesman Abbas Mousavi called  "the last chance for the remaining parties...to gather and see how they can meet their commitments towards Iran."

 

Until today, Tehran was skeptical about EU's commitment to the deal and threatened to exceed the maximum amount of enriched uranium allowed it by the deal after US had imposed a series of sanctions on the country.

Meanwhile, opponents of Instex - almost exclusively the US - have argued that the mechanism is flawed because the Iranian institution designated to work with Instex, the Special Trade and Finance Instrument, has shareholders with links to entities already facing sanctions from the U.S.  

 

The announcement will likely send president Trump off the rails, because in late May Bloomberg reported that as part of Trump's escalating battle with "European allies" over the fate of the Iran nuclear accord, he was "threatening penalties against the financial body created by Germany, the U.K. and France to shield trade with the Islamic Republic from U.S. sanctions" including the loss of access to the US financial system.

According to Bloomberg, the Treasury Department’s undersecretary for terrorism and financial intelligence, Sigal Mandelker, sent a letter on May 7 warning that Instex, the European SPV to sustain trade with Tehran, and anyone associated with it could be barred from the U.S. financial system if it goes into effect.

“I urge you to carefully consider the potential sanctions exposure of Instex,” Mandelker wrote in an ominous letter to Instex President Per Fischer. "Engaging in activities that run afoul of U.S. sanctions can result in severe consequences, including a loss of access to the U.S. financial system."

Germany, France and the U.K. finalized the Instex system in January, allowing companies to trade with Iran without the use of U.S. dollars or American banks, allowing them to get around wide-ranging U.S. sanctions that were imposed after the Trump administration abandoned the 2015 Iran nuclear deal last year.

“This is a shot across the bow of a European political establishment committed to using Instex and its sanctions-connected Iranian counterpart to circumvent U.S. measures,” said Mark Dubowitz, the chief executive officer of the Foundation for Defense of Democracies in Washington.

Here is a simpler summary of what just happened: this was the first official shot across the bow of the USD status as a global reserve currency, and not by America's adversaries but by its closest allies. And once those who benefit the most from the status quo openly revolt against it, the countdown to the end of the USD reserve status officially begins.

When asked to comment on the letter, the Treasury Department issued a statement saying “entities that transact in trade with the Iranian regime through any means may expose themselves to considerable sanctions risk, and Treasury intends to aggressively enforce our authorities.”

The US ire was sparked by the realization - and alarm - that cracks are appearing in the dollar's reserve status, opponents of Instex argue - at least for public consumption purposes - that the mechanism is flawed because the Iranian institution designated to work with Instex, the Special Trade and Finance Instrument, has shareholders with links to entities already facing sanctions from the U.S.

Separately, during a visit to London on May 8, Mike Pompeo also warned that there was no need for Instex because the U.S. allows for humanitarian and medical products to get into Iran without sanction.

“When transactions move beyond that, it doesn’t matter what vehicle’s out there, if the transaction is sanctionable, we will evaluate it, review it, and if appropriate, levy sanctions against those that were involved in that transaction,” Pompeo said. “It’s very straightforward.”

In conclusion, one month ago we said that "In 2018, Europe made a huge stink about not being bound by Trump's unilateral breach of the Iranian deal, and said it would continue regardless of US threats. But now that the threats have clearly escalated, and Washington has made it clear it won't take no for an answer, it will be interesting to see if Europe's resolve to take on Trump - especially in light of the trade war with China - has fizzled. "

The answer, it appears is that Europe felt unexpectedly emboldened, just hours before Trump's meeting with Xi, and that it is ready and willing to call Trump's bluff; it goes without saying, that if the US does indeed retaliate and proceed with sanctions against European banks, than the global trade war is about to turn far, far uglier.

LATE BREAKING UPDATE 6:26 PM EDT -- Europe has told the US Treasury that if the United States begins sanctioning any European country or company over Iran trade, European entities will WITHDRAW their funds from US Banks and Financial Markets, sending certain banks into collapse immediately.   

 

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  • This commment is unpublished.
    Steven Holsten · 3 months ago
    What the Hell is wrong with these European Dildo's?
  • This commment is unpublished.
    Reginald Fischer · 3 months ago
    Trump's trade wars and sanctions are turning the whole world against us. It's madness. This will not end well for the US.
  • This commment is unpublished.
    Keith Baumann · 3 months ago
    The question mark was supposed to be a smiley face...
  • This commment is unpublished.
    Keith Baumann · 3 months ago
    I’m enjoying the comments ?
    A very educated subscriber pool. The color commentary is priceless.. lmao
  • This commment is unpublished.
    A6eIntruder · 3 months ago
    I don’t think so, Europe is in no position to initiate a currency war on the US, the Euro is weaker than the Dollar. They are just adding pressure on Trump to make a deal with China, which probably won’t happen right now. Xi has a few bluffs to pull before they really make a deal. Just like Kim Jong Un, they bluff that a deal is imminent, and then change the language making the deal bitter. You’ll see, this war has got a long way to go. Popcorn ?!
  • This commment is unpublished.
    Frank Anast · 3 months ago
    The basic problem with people is they do NOT understand the financial system. Once we lose "reserve currency status" the dollar is dead and will become worthless relatively quickly. Get your money out NOW!
  • This commment is unpublished.
    Mel Perry · 3 months ago
    Geepers! I used to pay good money for less entertainment than our foreign endeavors yield these days. Then add in the Dems Clown Show and its hard to bite your nails in suspense between the belly laughs.
  • This commment is unpublished.
    HJ Richards · 3 months ago
    OK need more info. Which banks. Given the the predatory attitude of most banks this might be a good thing. Does this mean an immediate stock market crash ? Time we pull all out troops out of these countries and bring them home. They forget the lesson of WW2 and their near demise . They want to kiss Iran's ass let them as they will all be muslim countries soon enough. I want to understand the impact on us here at home , do we go to war with who and how soon. NATO is relic of the past we need to stop spending our money to protect these traitors and spend our money at home.