France and Germany are to take joint responsibility for an EU-Iran trade mechanism to minimize the risk of U.S. punishment but few now believe it will cover oil sales, heightening fears for the fate of the landmark international nuclear deal with Iran.
Diplomats said the French-German gambit is a “safety-in-numbers” tactic to overcome the refusal of individual EU states to host the mechanism to sidestep the risk of being targeted by the revived U.S. sanctions regime against Iran.
But with U.S. threats of retribution for sanctions-busting unrelenting, they told Reuters that the goals of the nascent trade mechanism could be scaled back to encompass only less sensitive items such as humanitarian and food products.
That may well fall short of what Iran’s moderates wish for to fend off anti-Western hardliners demanding Tehran ditch the 2015 nuclear deal which they opposed in the first place.
“The SPV (Special Purpose Vehicle for trade) is important, but what’s more important to the Iranians is oil and ensuring their exports in the long term,” said a senior French diplomat.
“None of the measures that we’re trying to put in place will perform miracles, but what we’re trying to do is a series of measures to convince the Iranians to keep to their nuclear commitments. That is our objective,” he said.
France, Germany and Britain – European signatories to world powers’ 2015 deal with Iran that curbed its disputed nuclear program – have scrambled to come up with measures to preserve its economic benefits for Tehran after U.S. President Donald Trump denounced the accord as weak and withdrew from it in May.
The European Union has so far enabled its lending arm, the European Investment Bank, to add Iran to a list of countries with which it does business and introduced a law to shield European companies from U.S. sanctions.
Both measures are part of a wider package meant to show European good faith to Iran and would be complemented with the so-called SPV, a clearing house that avoids monetary transfers in dollars between the EU and Iran.
The goal was to have the SPV legally in place by the time Trump reimposed oil sanctions on Iran on Nov. 5, though not operational until next year.
However, after no countries came forward to host the SPV and only Austria and Luxembourg – small states with solid financial systems – refused for fear of incurring U.S. sanctions, France, Germany and Britain were forced to go back to the drawing board.
“What’s in the air now is that France or Germany would host or preside over the SPV,” said an EU diplomat. “The French are the most pushy and the Germans are more prudent, but at the same time France doesn’t want to bear the brunt for everyone else.”
Two other diplomats said that if Paris and Berlin took joint control of the SPV it could deter the Trump administration from directly confronting two major U.S. allies.
Britain is still considering how to contribute, but is restrained by the distracting process of its pending departure from the EU and by the fact the SPV would be trading in euros, not Britain’s sterling currency.
French Foreign Minister Jean-Yves Le Drian told the bloc’s ministers in a closed-door meeting in Brussels on Nov. 19 that the Paris and Berlin were working closely together to achieve something by year-end, two other EU diplomats said.
The French, German and British finance ministers will discuss the SPV on the sidelines of this weekend’s G20 summit, according to a French Finance Ministry source.
