The European Union will create a mechanism, called "a special purpose vehicle," for trade with Iran to reduce the effect of US sanctions against Tehran, and salvage the 2015 Iran nuclear deal, a joint statement by Russia, the United Kingdom, France, Germany, China, the European Union and also Iran said after a ministerial meeting at the UN General Assembly in New York, Kommersant business daily reports.
This decision is set to calm Tehran ahead of the second package of US sanctions, which limit cooperation with Iran in the oil and gas sector. Dozens of international companies, including European ones, have halted cooperation with Iran. Tehran has threatened to abandon the nuclear deal if its interests are not protected.
According to EU foreign policy chief Federica Mogherini, the EU member-states will create a legal entity to carry out financial transactions with Iran, thus allowing European companies to work with the country in line with European laws. This mechanism will be open for other partners. Five signatories of the deal believe that Tehran is fully committed to the nuclear deal and are doing their utmost to preserve the agreement. Tehran has earlier threatened to leave the JCPOA if Europe did not develop a mechanism for trade with Iran by November 4.
"Europe is trying to calm Iran, which is threatening to withdraw from the Joint Comprehensive Plan of Action (JCPOA). In this context, the creation of a mechanism is certainly a positive step, but it’s unclear how it will work. Most likely, it will be aimed at small and medium-sized business. Large companies such as Total are too integrated in the global financial system and for them the US sanctions pose a significant threat. It’s hard to imagine how they can be forced to remain in Iran," Yuliya Sveshnikova, Research Associate at the Higher School of Economics, told the paper.
Andrei Baklitsky, an expert with the PIR Center, noted that a plan to create a new mechanism for accounts with Iran has been on the agenda for a long time and the lack of progress by the EU signaled that Brussels was not seeking to seriously counter Washington. So, Mogherini’s statement is an important and real step towards preserving the JCPOA, he said. The question was whether to use EU structures, which were protected from US sanctions (such as central banks of France and Germany), or to create new ones, which would be isolated from Washington’s influence, and the latter option was chosen.
"Now the idea is most likely to establish a sort of a clearing office that will receive money from European companies for Iranian oil and from Iran for European goods. The money won’t de facto leave the EU thus limiting US pressure," the expert said. Nevertheless, he did note the possibility that Washington could slap individual sanctions against the leadership and personnel of the new structure. Meanwhile, fewer private European companies are ready to take risks and continue working with Iran, under the threat of US sanctions. "The financial channel won’t help trade if there is no buyer. Perhaps, the EU’s next step will be to set up a state structure for buying oil," he said.