EU Unveils Iran Trade Vehicle as It Vows to Salvage Nuclear Deal

(Bloomberg) -- Three European powers unveiled a plan to help companies trade with Iran, in a move intended to salvage a fragile nuclear accord with the Islamic republic, in defiance of U.S. President Donald Trump’s sanctions.

“We’re now establishing a possibility to secure trade,” German Foreign Minister Heiko Maas told reporters in Bucharest, Romania, on Thursday, as he confirmed the launch of a so-called special purpose vehicle for facilitating transactions with companies willing to do business with Iran. “It’s a step that makes clear that even when others have a different opinion, we are capable in the EU of going our own way in a united and resolute manner.”

The SPV, called the Instrument in Support of Trade Exchanges, is headquartered in Paris with a German chief executive officer, Iran’s ambassador to the U.K. Hamid Baeidinejad said in a post on Twitter. Germany, France and the U.K. will be shareholders, he said.

The initiative is an important element of the EU’s effort to keep Iran from quitting the Joint Comprehensive Plan of Action, the 2015 accord to constrain the nation’s nuclear activities. The U.S. pulled out of the JCPOA in May and has since reimposed sanctions.

Since the U.S. left the nuclear accord, the deal’s remaining powers -- China, France, Germany, Russia and the U.K. -- have struggled to provide the sanctions relief promised when Iran agreed to limits on its nuclear activities. The mechanism launched by the European nations had faced delays and skepticism that it can successfully persuade companies to trade.

Sigal Mandelker, the Treasury’s top sanctions official, said in December she isn’t concerned at all that the mechanism can sidestep sanctions.

“Most non-US institutions want to avoid running afoul of the U.S. sanctions regime, to avoid the risk of any potential restrictions on accessing the U.S. market,” Doug Davison, a dispute resolution partner and sanctions expert at the lawfirm Linklaters, said in an emailed statement. “What happens next will be a true test of how far parties are willing to go to trade with Iran in view of U.S. economic sanctions risk.”

Transatlantic Tensions

The European move also risks inflaming tensions with the U.S., which has warned that the efforts wouldn’t work. The Trump administration has deemed the channel an attempt to evade its “maximum pressure” campaign on Iran. The three founding countries hope that others will join the vehicle, boosting its effectiveness, and shielding them from Trump’s ire.

The 28-nation EU, which is the world’s largest trading bloc, is poised to back the new structure. The vehicle will have a positive “impact on trade and economic relations with Iran, but most importantly on the lives of Iranian people,” the bloc will say in a joint communique, a draft of which has been seen by Bloomberg.

“My formal reaction to that will be of strong welcoming and support to the establishment of the special purpose vehicle,” EU foreign policy chief Federica Mogherini told reporters in Bucharest on Thursday ahead of a meeting of the bloc’s foreign ministers. The SPV “will allow for legitimate trade to continue as foreseen in the nuclear agreement,” she said.

©2019 Bloomberg L.P.