European officials said they created a trading vehicle to help Iran get some relief from U.S. sanctions, but Tehran may see the proposal as insufficient to stop it from moving forward with a threat to violate its nuclear deal.
The remaining parties to the nuclear deal, abandoned by the U.S. last year, have been scrambling to find a way to keep Iran from leaving the agreement. They held an urgent meeting in Vienna in an effort to hold Iran from violating the deal. The trade mechanism was announced after the meeting.
But Iran said it would continue with its plan to enrich uranium even though it is just days away from a volume that would violate the nuclear accord.
Iran's deputy foreign minister Abbas Araghchi said Friday he would report back to Tehran on the talks. "The decision to reduce our commitments has already been made and we will continue unless our expectations are met," he said.
Araghchi said the talks were a "step forward, but it is still not enough and not meeting Iran's expectations."
The U.S., meanwhile, warned European companies that they have a choice of doing business with the U.S. or Iran. Brian Hook, State Department's special representative on Iran, made the comment to reporters in London Friday.
"The Europeans are basically trying to placate them by setting up this trade mechanism. It's basically a barter trade system. They had high expectations that it could handle such things as oil, which we saw as unrealistic," said Henry Rome, Eurasia Group analyst on Iran. "It's mainly designed to allow Iran to buy humanitarian goods. What we saw today was basically the Iranians saying we'll get back to you. The likely outcome is it's not good enough, and we'll get additional nuclear escalation."
Oil prices fell right before the U.S. futures close when the European Union said in a statement that the remaining signatories to the Iran deal would "intensify" efforts to reduce the impact of sanctions and normalize trade with Iran. U.S. West Texas Intermediate crude futures settled down 96 cents, or 1.6%, at $58.47 a barrel Friday after trading in a narrow range for most of the session.
Oil traders saw the news as a possible way for the nuclear deal to be salvaged. "It lessens the tension for now. If they were going to pull out and create more mischief, it was a path to another conflict," said John Kilduff of Again Capital.
The U.S. has ratcheted up the pressure on Iran by prohibiting any waivers from the sanctions for Iran's oil customers. That has squeezed Iran's ability to export, and now analysts estimate that Iran's oil exports have fallen below than 500,000 barrels a day, down from more than 2 million barrels before sanctions.
Britain, France and Germany, the nuclear deal's signatories, set up the trade channel, called INSTEX, and it will be available to all EU countries.
China and Russia also still remain parties to the nuclear the deal. The U.S. left the deal because it viewed it as one-sided. Iran has set a July 7 deadline by which it expects the other parties to grant it some relief from the U.S. sanctions.
"They are threatening various steps, announcing deadlines, removing deadlines, changing them, making new threats, like they are dropping from the proliferation treaty. They're really trying to light a fire under the Europeans to see what the maximum is they are going to get," said Rome.
"They're going to get mainly humanitarian or non-sanctioned goods. What the Iranians really want, and the whole ball game for them, is oil, and the Europeans cannot simply facilitate that.The Iranians are guaranteed to be disappointed by the outcome here," he said.
—Reuters contributed to this story