EU, China and Russia sidestep US sanctions to keep Iran deal alive
Analysts doubt the proposed ‘barter system’ plan will be enough to keep Tehran onside
The EU, China and Russia have agreed a joint plan to sidestep unilateral US sanctions aimed at crippling the Iranian economy, in a final last-ditch effort to save the 2015 nuclear deal with Tehran.
European diplomats hope the proposed measure – known as a special purpose vehicle (SPV) – “will help persuade an increasingly reluctant Iran to stay inside the deal in the hope of rescuing its economy”, The Guardian says.
The aim of the SPV is to facilitate payments related to Iranian exports and imports, effectively underpinning a sophisticated barter system that can avoid strict US Treasury sanctions.
Israeli newspaper Haaretz says this system is similar to the one used by the Soviet Union during the Cold War to trade with the West.
This means, for example, that Iran could shift oil to a French firm and use the credit to pay for Italian goods going the other way, without any funds passing through Iranian banks.
All transactions would be handled by a financial intermediary and be conducted in sterling and euros, not dollars.
Analysts have, though, already raised serious doubts about the viability of the plan. CNBC says that while the SPV would establish a clearer financial channel to trade with Tehran, “it's not likely to be able to protect participating companies from US secondary sanctions”.
The push for such a channel, “reflects growing calls in countries such as France and Germany for the EU to adopt tools that will allow it to pursue its foreign-policy goals with less recourse to an unpredictable US ally” says Bloomberg.
Since withdrawing from the Iran deal and reimposing economic sanctions, the Trump administration has continued to ramp up its rhetoric against the Iranian leadership.
Trump has repeatedly warned countries they have to choose between doing business with the US, the world’s largest economy, or Iran.
Many European companies have already made plans to pull out. French energy giant Total, carmakers Peugeot and Renault, and Germany's Siemens and Daimler have suspended operations, with others set to follow.
It appears the sanctions are already having an effect, with Iran’s currency the rial losing about two-thirds of its value this year, hitting a record low against the US dollar this month. This is believed to form part of a wider US strategy to bring Iran’s economy to its knees, a move which it is hoped will ultimately lead to regime change.
Unsurprisingly, therefore, the US has responded to the EU-led plan with a mixture of anger and dismay. Speaking on the sidelines of the UN General Assembly, US Secretary of State Mike Pompeo called the proposals, “one of the of the most counterproductive measures imaginable for regional and global peace and security”.
Still, the US’s international financial clout means Europe’s efforts are unlikely to bear much fruit, according to Javier Solana, a former Nato secretary general and EU foreign envoy who was a long-time promoter of diplomacy with Iran.
“The power of the US today is not military, it’s the dollar,” Solana said earlier this month in an interview in Madrid. “They squeeze you out.”