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Think Tank Recommends Ways of Overcoming JCPOA Challenges Facing EU

Think Tank Recommends Ways of Overcoming JCPOA Challenges Facing EU Think Tank Recommends Ways of Overcoming JCPOA Challenges Facing EU

European efforts to keep Iran in the nuclear deal (formally known as the Joint Comprehensive Plan of Action) will face major challenges, including US attempts at sabotage.

The US administration will look to use JCPOA as a bargaining chip in its bilateral negotiations with Europe, China and Russia on trade policy, tariffs and sanctions. Therefore, European leaders must make important decisions about how far they are willing to go to secure a nuclear agreement borne out of more than a decade of diplomacy. They can only do so, if they act collectively and firmly.

Yet they must do so to prevent an escalation of tensions between the West and Iran, which will have disastrous consequences for global security, reads an article published by the European Council on Foreign Relations.

The pan-European think tank has presented a set of recommendations for addressing the above-mentioned challenges. Below is the full text of these recommendations:

The EU/E3 should accelerate measures to establish a foundation for sustaining financial channels (including SWIFT) with Iran before November, when the US will introduce secondary sanctions designed to hit Iran’s oil and banking sector. In this case, European central and state banks will have to act as a bridging mechanism.

While there are ways of moving funds to and from Iran, state banks will have to engage in operations that provide settlement and clearing facilities. At the same time, European governments should remind Iran that their banking relationship can only continue, if the country follows the Financial Action Task Force’s roadmap.

The EU and member states should devise a financial framework within which European companies (particularly small- and medium-sized enterprises) can do business with Iran while complying with US sanctions. Technical experts have called for the creation of special purpose vehicles or “gateway banks” (supported by European state banks). These mechanisms will need to avoid direct links between Iranian entities and European private banks. Cooperation on this should extend into a larger structure that crosses a coalition of willing member states, thereby sharing risk between them.

The EU and member states (particularly leading importers of Iranian oil such as France, Greece, Italy and Spain) should increase their coordination with China and Russia on measures to minimize the impact of US secondary sanctions on Iranian oil exports.

European countries should firmly reject any proposed US framework for significant oil reduction from Iran in return for waivers to continue limited oil exports. This would amount to legitimizing the US secondary sanctions architecture.

Russia and Iran are already in talks over significant Russian investment in the Iranian energy market, which could reportedly involve increased purchases of Iranian oil that could be reprocessed for global distribution via Russia. The E3 and China, together with other relevant private sector entities, should investigate whether it is feasible to offset potential reductions in Iranian oil exports through oil-swap arrangements with non-signatories to JCPOA such as Turkey and Iraq.

The European Commission should incorporate clear guidelines for European companies vis-à-vis EU Blocking Regulation. The regulation includes a compensation mechanism (Article 6) that allows European entities to seek compensation if they become subject to extraterritorial US financial penalties. As this mechanism has rarely been enforced, its limits remain unclear.

The commission should work with member states, regulators and the private sector to clarify and facilitate access to compensation, particularly for small- and medium-sized enterprises that do business with Iran.

It should mandate a competent body to facilitate legitimate European business with Iran. The body should provide comprehensive oversight of the US Treasury’s enforcement of extraterritorial sanctions. This should involve a reporting mechanism that assesses the legal and other tactics the US Treasury adopts against European companies, pursuant to secondary sanctions. The body should also assist European companies subject to US investigations.

The European Commission should address discrimination and overcompliance related to trade and investment with Iran in the European banking sector. As this problem is a direct consequence of US secondary sanctions, European leaders should primarily address it through regulatory measures that set a burden of proof requiring company boards to certify that their decisions are legally grounded under European law. The Blocking Regulation can provide a foundation for such measures.

European regulatory bodies should provide greater oversight of European commercial banks’ decisions to block the flow of funds related to Iran, reduce the likelihood that such decisions will be arbitrary.

The EU/E3 should not invest heavily in attempts to negotiate with the US administration on exemptions from secondary sanctions, given the current White House’s clear lack of interest in treating European allies amicably. The EU/E3 should shift to a more firm and robust negotiating posture similar to their stance on US trade tariffs. They should warn the US about the costs for western energy consumers of reducing purchases of Iranian oil at a time when Libyan, Venezuelan and Nigerian exports have been disrupted, given that it remains uncertain whether Saudi Arabia and Russia have the capacity to increase production to offset this disruption.

European governments should limit the US Treasury’s space to demonstrate the power of sanctions in Europe. EU member states should urgently engage in private consultations to prepare countermeasures against US attempts to pressure SWIFT and its board members, or to target European entities—using specially designated nationals lists—for doing business with Iran deemed legitimate under EU law.

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