EU bid to dodge Iran sanctions flounders 

The European Union’s hopes of setting up a bartering system with Iran to bypass US sanctions appears to have proved unsuccessful.

An EU initiative to maintain trade with Iran despite US sanctions this month that targeted oil and gas exports and access to the US financial system has foundered after no member state appeared keen to host the plan and risk US retribution. 

Germany, France and the UK are expected to call on Luxembourg to host the “special purpose vehicle” (SPV) after Austria declined.

MEPs say they are keen to preserve trade ties with Iran.

“We Europeans cannot accept that a foreign power, not even our closest friend and ally, takes decisions over our legitimate trade with another country,” said Vera Jourova, Brussels’ justice commissioner told the European Parliament in Strasbourg. 

Europe has tried to preserve the 2015 Iran nuclear agreement after Donald Trump contravened the deal in May.

Iran warned that it could scrap the nuclear deal if the EU could not guarantee protection from US sanctions.

The SPV could barter for oil and gas to circumvent the US dollar, which is used to conduct oil sales globally.

Reluctance to host the SPV comes from fears that European banks trading with Iran could face Washington’s wrath.

Luxembourg set up an SVP with Iran during the 2009-12 eurozone crisis.

Belgium and Luxembourg were possibilities but had both expressed strong reservations, an unnamed diplomat was quoted saying. 

On Tuesday, the White House said it would target European institutions that defied US sanctions.

Washington’s Iran sanctions chief, Brian Hook, said it was “no surprise” that EU efforts to establish an SPV for non-dollar trade with Iran were floundering over the fear that the European host would face American punishment.

“European banks and European companies know that we will vigorously enforce sanctions against this brutal and violent regime,” he told the media. 

Hook said the EU effort sent out “the wrong signal, at the wrong time”. 

“Any major European company will always choose the American market over the Iranian market.”

Hook said waivers from sanctions granted to eight of Iran’s biggest oil importers – China, India, Greece, Italy, Taiwan, Japan, Turkey and South Korea – were to ensure Trump’s measures did not harm “allies” or lead to spiralling oil prices.

“We have looked at these on a case-by-case basis, taking into account the unique needs of friends and partners, and also ensuring that as we impose sanctions on Iran’s oil sector that we do not lift the price of oil,” the special representative said.

 

Luxembourg could be asked to host the sanctions-busting measure. Picture credit: Wikimedia