EU Mechanism for Iran Trade Pursues Long-Term Targets

France’s Foreign Ministry said on Thursday the creation of a special purpose vehicle (SPV) that the European Union is considering to enable trade with Iran to help the bloc avoid the extraterritorial reach of US law.
EU foreign policy chief, Federica Mogherini, said in September that the new mechanism would be in place by November as it seeks to keep trade flowing even though new US sanctions on Tehran will take effect from Nov. 4.
The idea is to circumvent the sanctions under which Washington can cut off any bank that facilitates an oil transaction with Iran from the US financial system.
Until now, the SPV appeared to focus solely on Iran. But in a reply to Reuters, the French Foreign Ministry said the idea was for the SPV to go beyond Iran and cover a wider range of EU trade.
“The ongoing work on the special purpose vehicle should facilitate financial transactions for companies wishing to maintain trade relations with Iran, in accordance with European law,” foreign ministry spokeswoman, Agnes Von der Muhll, said.
“It aims to create an economic sovereignty tool for the European Union beyond this one case. It is, therefore, a long-term plan that will protect European companies in the future from the effect of illegal extraterritorial sanctions.”
Many diplomats and analysts have expressed doubt over whether such a mechanism could ultimately thwart US sanctions, as the United States could amend its sanctions laws to target the SPV itself.
Brian Hook, the US special envoy on Iran, told reporters on Monday that European efforts would struggle to gain traction given there was little demand after more than 100 companies had pulled out of Iran.
With the flood of companies leaving in mind, the European Union’s focus has shifted to the longer term to overcome a perception that European policy is held hostage by the US treasury.
European Commission President Jean-Claude Juncker has proposed promoting the euro as a global currency to challenge the dollar, potentially allowing oil to be priced on world markets in euros.
The ministry's comments came after French Finance Minister Bruno Le Maire recently said sanctions imposed on Iran by the United States offer an opportunity for Europe to develop its own independent financial institutions
“I am convinced that the outcome of that crisis with Iran will be the chance for Europe to have its own independent financial institutions so we can trade with whoever we want,” Le Maire said at the Globsec Tatra Summit conference in Slovakia’s Strbske Pleso earlier this month.
“It is not up to Washington to decide whether we are allowed to trade with Iran,” Le Maire was quoted as saying by Reuters.
The SPV will operate in addition to a blocking statute that Brussels passed back in August, which stops European companies from complying with the US sanctions unless they have authorization from the European Commission.
The Blocking Statute applies to anyone, foreign or otherwise, who is a resident in the European Union and also does business in Iran. This includes companies incorporated in the EU and ships registered in an EU state or fly an EU member state flag.
The statute also blocks the effects of US court actions in Europe and allows European firms to recover damages arising from the sanctions from anyone who causes them.
Latest Eurostat data show trade between Iran and the 28 member states of the European Union during the first half of 2018 amounted to more than €8.3 billion, registering a 12.8% decrease compared with last year’s corresponding period.