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EU nations, China, Russia agree to come up with plan to circumvent US sanctions on Iran

European Union High Representative for Foreign Affairs Federica Mogherini (left); Iranian Minister of Foreign Affairs Mohammad Javad Zarif (center) and political deputy at the Ministry of Foreign Affairs of Iran Abbas Araghchi take part in a Comprehensive Plan of Action (JCPOA) ministerial meeting on the Iran nuclear deal on July 6, 2018, in Vienna, Austria. The European Union agreed on Monday to come up with a plan to circumvent U.S. sanctions on Iran. (HANS PUNZ/AFP/Getty Images)

The United Kingdom, France, and Germany have signed an agreement with Russia and China to circumvent U.S. sanctions on Iran. The countries are still working on details of how future trade deals with Iran would work.

Why do these nations want a deal with Iran?

In May, President Donald Trump announced that the U.S. would be pulling out of the Joint Comprehensive Plan of Action (also known as the Iran nuclear deal), which had been negotiated by the Obama administration.

“At the point when the United States had maximum leverage,” this deal gave the Iran regime “many millions of dollars in actual cash,” Trump said, calling the deal an “embarrassment” to himself and all U.S. citizens and "defective at its core.”

The United Kingdom, France, and Germany implored the Trump administration to stay in the Iran deal. In an effort to convince Trump to let the deal stand, they sent a joint proposal to the other members of the EU in March to slap sanctions on Iran. The three nations hoped that these sanctions would convince Trump that Iran could be kept in line without revoking the nuclear deal.

In 2017, the European Union was Iran's second-largest trading partner after China, with more than 9 billion euro ($10.6 billion) in trade just that year.

In November, U.S. sanctions against Iran will go back into full effect. As a condition of these sanctions, any bank that does business with Iran will be banned from doing business with U.S. financial institutions.

What happened this week?

On Monday, the U.K., France, Germany, China, and Russia agreed to come up with a workable plan to trade with Iran. All five of these nations had signed onto the Obama administration's Iran nuclear deal.

The European Union's top diplomat, Federica Mogherini, said that "this will mean that EU member states will set up a legal entity to facilitate legitimate financial transactions with Iran and this will allow European companies to continue to trade with Iran in accordance with European Union law and could be open to other partners in the world."

In a joint statement, the five nations said:

Mindful of the urgency and the need for tangible results, the participants welcomed practical proposals to maintain and develop payment channels notably the initiative to establish a Special Purpose Vehicle (SPV) to facilitate payments related to Iran's exports, including oil.

They also said that they wanted to "protect the freedom of their economic operators to pursue legitimate business with Iran." Mogherini said that the nations are still working out the details of how this new trade deal would work.

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