European Gov’ts Exploring Financial Channels for Iran

The French, British and German governments have told Iran they are exploring activating accounts for the Central Bank of Iran with their national central banks to open a financial channel and keep alive the Iranian nuclear deal, according to several European officials.

The move is the first concrete sign that Europe could deliver on its promise to take steps to sustain the Iranian nuclear deal, setting European governments squarely against the Iran sanctions policy of the US administration aimed at isolating Tehran economically, Wall Street Journal reported.

Following the US President Donald Trump's withdrawal from the deal in May, Iran has said it would stop complying with the nuclear deal unless it continues to receive the economic benefits of the 2015 agreement. That deal saw most international sanctions on Tehran lifted in exchange for strict but temporary restrictions on Iran’s nuclear work.

According to the report, officials involved in discussions said the option of central banks activating Iranian central bank accounts—or reactivating those that have been dormant for years—is one of several that European governments are actively exploring. 

The three European governments laid out their plans to Iran during discussions earlier this month among foreign ministers and senior officials in Vienna, Austria. Officials said they are still trying to iron out details.

Other European governments, including Austria and Sweden, have also said they would consider doing likewise, the officials said. 

However, officials stressed that while discussions have started with central banks, they haven’t yet received the official authorization. European central bank officials have said there is reluctance to forge financial links with Iran, as the US prepares to reimpose sanctions.

Iran would also need to implement legislation to meet anti-money-laundering standards set by an international watchdog, the Financial Action Task Force, the officials said.

The Bank of England had no comment. The French and German national banks didn’t immediately respond to requests for comment.

Last week, Washington rebuffed a formal European request for the US to give European companies broad exemptions from sanctions, which will seek to minimize Iranian energy exports and the country’s commercial links with foreign businesses.

The US officials explicitly warned against doing business with the Iranian central bank, saying it “should not be considered a legitimate institution with which European banks—including central banks—should be engaging”.

US officials have repeatedly said European companies and people could be targeted if they continue doing business in Iran once US sanctions fully snap back in November. US sanctions apply to foreign as well as domestic companies.

With major European companies announcing plans to leave or freeze investments in Iran, the latter has been pressing for speedy solutions from Europe to lock in the economic benefits of the nuclear deal. 

Iranian Foreign Minister Mohammad Javad Zarif has demanded some measures be put in place before the first set of US sanctions is reimposed on Aug. 6, a timetable French Foreign Minister Jean-Yves Le Drian called "unrealistic".

However, after the July 6 Vienna meeting, Zarif said he was encouraged by European, Russian and Chinese work on Iran’s key concerns: opening financial channels to Iran and allowing Iran to continue exporting oil.

“Moving in right direction on concrete steps for timely implementation of commitments,” Zarif said at the time on Twitter.

European Pledge 

France, Germany, Britain, Russia and China, which negotiated the 2015 nuclear deal alongside the US and Iran, pledged in Vienna to protect “economic operators” for investing or carrying out “commercial and financial activities”, a reference to possible central bank payment channels, according to European officials.

On Monday, EU foreign policy chief, Federica Mogherini, said the bloc was determined to follow through despite the US refusal to grant exemptions.

“I don’t see this reply as bringing anything new to the work we’re doing,” she said of the US response.

The hope is that by activating euro, sterling and other-denominated accounts for Iran’s central bank in Europe, Iran could more easily repatriate oil export revenues—or at least use that revenue to purchase key products, like spare parts for its automobile industry, in Europe.

Most large commercial western banks have refused to open Iranian accounts, fearing that US sanctions would see their access to dollars being cut by US authorities.

While European officials hope that their central banks would be protected from sanctions, they acknowledge there is no guarantee. The US could place sanctions on central bank governors and board members—or even deny them access to US financial markets, though there could be broad economic costs for doing so.

The US has already placed sanctions on Iran’s central bank governor, Valiollah Seif, alleging that he has funneled money to the Lebanese group Hezbollah.