Britain, France and Germany, parties to a 2015 nuclear deal with Iran along with the United States, China, and Russia, are determined to show they can compensate for last year's US withdrawal, salvage trade promised to Iran under the accord and still prevent Tehran from developing nuclear bomb capability.

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French President Emmanuel Macron has led those efforts and is trying to clinch a $15 billion credit line that would offset tough US sanctions that have strangled Iran's oil exports, but that requires getting some backing from Washington.

In addition to that the Europeans have attempted for more than a year to set up the Instex trade mechanism, but it is still not operational. It would initially only deal with food and medical trade and not Iran's principal export – crude oil.

"The Iranian mirror structure is not operational. The day they have signed the necessary FATF (Financial Action Task Force) conditions we'll talk about it and the day that we are sure that the first transactions through Instex aren't put under American sanctions, [then] we'll talk about it again," the diplomatic source said.

France's foreign minister said on Tuesday that the mirror company had not been set up yet.

But the clock is ticking, Iran's president on Wednesday gave Europe another two months to save the deal and warned that Tehran was preparing for further significant breaches of the accord's caps on nuclear activity if diplomatic efforts ultimately fail.

Until now, European officials have said that conforming to Paris-based FATF rules was not a prerequisite for Instex, although it would facilitate its establishment.

Iran's parliament has approved some new measures against funding terrorism under pressure to adopt international standards. But the Guardian Council, which vets laws and elections for compliance with Iran's Islamic constitution, blocked a draft law in 2018 on the grounds that it would prevent the Islamic Republic from providing financial support to Hezbollah in Lebanon, which is under US sanctions.

In June, the FATF said that it would only consider fully-enacted legislation and gave Iran until October to meet its norms or else face greater scrutiny of international financial transactions with Tehran.

The diplomat's comments also reflect how difficult it will be for the Europeans to convince US President Donald Trump to ease his administration's "maximum pressure" policy on Iran.

The United States would have the economic clout to block any credit line for Iran or sanction companies trading with it.

Washington has not commented on the credit line proposal, which would contradict its stated policy of imposing maximum pressure to force Tehran to rein in its nuclear and missile programs as well as what the White House views as its destabilizing regional behavior. US officials have repeatedly said that they do not believe Instex will get off the ground.

Iranian officials have repeatedly said that Instex must include oil sales or provide substantial credit facilities for it to be beneficial.

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The INSTEX special purpose vehicle began operating nearly two weeks ago, but now families of terror victims and the Shurat Hadin Israel Law Center – an NGO dedicated to "fighting terrorism and safeguarding Jewish rights worldwide" – have launched legal initiatives seeking to confiscate Iranian funds passing through INSTEX.

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The plaintiffs are all Israeli and American victims of terror whose relatives were either murdered or wounded in attacks perpetrated in Israel by terrorist organizations funded by Iran, such as Palestinian Islamic Jihad and Hamas. The families have already been granted compensation upwards of hundreds of millions of dollars by federal courts in the US.

In an unprecedented lawsuit, these families on Monday will file a lawsuit in the Court of Sessions in France, demanding that all money, oil or other goods belonging to Iran or earmarked for Iran via a third party, will be paid as compensation to the victims of terror as part of the enforcement of the American courts' ruling. The families are being represented by attorney and Shurat Hadin President Nitsana Darshan-Leitner, and French attorney Charles Meyer.

The American sanctions forbid the transfer of Iranian funds through the international banking system. European and Asian companies, afraid of American sanctions, consequently ceased doing business with Iran, leading to INSTEX to allow Europe and other parties to continue buying Iranian oil.

One of the families involved in the lawsuit, the Braun family, won a stunning $178,500,000 US court judgment against Iran and Syria in January 2017, for Iran and Syria's provision of material support to Hamas, which perpetrated the attack which led to the death of three-month-old baby girl, Chaya Zissel Braun, who was murdered in a vehicular terror attack on the Jerusalem light rail in October 2014.

"It is appalling that the Europeans are continuing to help the regime in Tehran do business, when they know that Iran is still supporting and funding terror against Jews," said Darshan-Leitner.

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Set up by France, Britain, and Germany, Instex is a barter trade mechanism that aims to avoid direct financial transfers by offsetting balances between importers and exporters on the European side.

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The mechanism is aimed at making it possible for trade between European Union members and Iran to continue in the face of stiff US sanctions since Washington quit a 2015 nuclear accord between Tehran and world powers last year.

Those sanctions have effectively suffocated Iran's economy by clamping down on its oil sales.

"We want Instex to enter into force in a few days, and I hope that we will be able to operate in a few days. I hope the first transaction will be completed in a few days," Le Maire told journalists at a meeting in Poland.

"The first transaction will be a limited one, but this is a starting point and we expect Instex to be an efficient tool," Le Maire added.

Iran has said it wants to keep the nuclear deal alive but must receive the promised economic benefits. On Monday, it said it had amassed more low-enriched uranium than permitted, its first major breach of the nuclear pact, and has said it will announce further measures on July 7.

France's Foreign Ministry said on Wednesday that Instex would become operational based on Iran's "full compliance with its JCPOA [Joint Comprehensive Plan of Action] commitments."

"We aren't going to press the yes button if there are doubts about its compliance," said one European diplomat.

Two other European diplomats said that while possible transactions had been identified, it was too early to move ahead as due diligence was still underway and that as of yet, the Iranian side still had to complete a mirror company that would facilitate the process.

However, the Europeans have created an advanced payment system that could enable some small transactions soon.

Even then, the system initially will only deal with products such as pharmaceuticals and foods, which are not subject to US sanctions.

Iranian officials have repeatedly said that Instex must include oil sales or provide substantial credit facilities for it to be beneficial.

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