The European Union’s foreign policy chief announced the bloc was creating a new payment mechanism to allow countries to transact with Iran while avoiding U.S. sanctions.
The "special purpose vehicle" (SPV) would aim to "assist and reassure economic operators pursuing legitimate business with Iran," according to a joint statement released by the remaining members of the Iran nuclear deal: France, Britain, Germany, Russia and China, CNBC reported.
"This will mean that EU member states will set up a legal entity to facilitate legitimate financial transactions with Iran, and this will allow European companies to continue to trade with Iran in accordance with European Union law and could be open to other partners in the world," Federica Mogherini, the EU's high representative for Foreign Affairs, told the UN General Assembly Tuesday.
The technical details will be worked on by experts in future meetings, she said.
American sanctions have already been imposed on a number of Iran's industries, such as aviation, metals and its ability to trade gold and acquire dollars, as a result of President Trump’s withdrawal from the 2015 nuclear deal.
On Nov. 4, a second round of penalties will fall on Iran's massive oil sector, which accounts for 70% of the country's exports. Iran is the world's seventh-largest oil producer.
The Iran nuclear deal, known officially as the Joint Comprehensive Plan of Action, was spearheaded by the Obama administration and signed by the aforementioned five world powers, the U.S. and Iran, lifting economic sanctions on Tehran in exchange for curbs on its nuclear program, CNBC reported.
The Trump administration pulled out of the afreement in May, calling it the "worst deal ever," despite U.S. allies and international agencies attesting to Iran's compliance to the deal's requirements, Kallanish Energy reports.
Washington's subsequent re-imposition of sanctions now threaten to cut those who transact with Iran off from the U.S. financial system. This has forced numerous multinational companies and foreign investors out of the country, while the impending oil sanctions aim to push countries' imports of Iranian crude to zero.
The move angered U.S. allies and the deal's signatories, who have since been searching for ways to enable their companies to continue doing business with Iran. All of the deal's remaining members engage in trade with Iran, particularly for its oil.
The SVP will intend to serve as a "clearing house" of sorts for transactions with Iran in order to avoid involving central and commercial banks, who fear U.S. penalties on their operations, CNBC reported.
Whether the sanctions-skirting plan will actually work is a different matter. The U.S. has the power to expand its sanctions in response, but the scale of retaliation may depend on how far each side is willing to push its aims.
