To circumvent US sanctions against Iran and to continue trade with the country, Germany, France and the UK have set up a payment channel called INSTEX. The creation of this channel was confirmed on January 31 by German diplomats.

“This step makes it clear that we are also going our way in a determined and united way  within the European Union – even if others take a different view,” German Foreign Minister Heiko Maas told Deutsche Welle (DW), Germany’s international broadcaster. The minister was speaking while on a trip to Bucharest, Rumania.

The question now is how will the United States react to INSTEX, which is defined as “Special Purpose Vehicle” that will allow European businesses to trade with Iran, despite strict US sanctions. US President Donald Trump pulled the US out of the 2015 Iran nuclear deal and reimposed sanctions last year.

As reported by Deutsche Welle (DW), Germany’s international broadcaster, the US State Department had earlier released a statement that said it does not expect the European Special Purpose Vehicle (SPV) designed to facilitate trade with Iran “will in any way impact our maximum economic pressure campaign”.

According to DW, the payment channel allows for European countries to continue trade with Iran but could put them on a collision course with Washington.

Meanwhile, the news from Iran is positive. Iranian Deputy Foreign Minister Abbas Araghchi told state television it was “a first step taken by the European side … We hope it will cover all goods and items”.

As for others in the EU, Belgian Foreign Minister Didier Reynders said that Europe did share US concerns about Iran but “at the end of the day it will be companies that decide whether or not they want to work in Iran, bearing in mind the risk of American sanctions”.

In a separate report, Al Jazeera noted that INSTEX will initially be used for non-sanctionable trade, including humanitarian goods such as medicine, food and medical devices. Some have questioned whether it will prove effective.

“If [the mechanism] will permanently be restricted to solely humanitarian trade, it will be apparent that Europe will have failed to live up to its end of the bargain for Iran,” political analyst Mohammad Ali Shabani told Al Jazeera.

Another point raised by Al Jazeera is that the launch of INSTEX s not only a matter of Iran-EU relations but also embodies a new approach by the bloc towards US policies.