The European Union said it has set up a special-purpose vehicle that will handle transactions involving Iranian oil and European goods, AFP reports, citing a statement made by the EU's head of foreign policy Federica Mogherini at the UN.
"In practical terms," Mogherini said, "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."
Reuters quoted European diplomats as saying the scheme was similar to the barter system used by the Soviet Union during the Cold War, which eliminated the use of any money. Some of these diplomats, however, seemed concerned that this attempt to keep Iranian oil flowing into Europe is doomed. Washington, they said, could simply expand the scope of the sanctions to include barter transactions. Reuters did not elaborate on how exactly this would be done legally.
"The key is to keep all possibilities open so that we can signal to the Iranians that the door isn't closing," one French diplomat said.
The European signatories to the Joint Comprehensive Plan of Action, more commonly known as the Iran nuclear deal, have demonstrated exemplary verbal efforts to keep the deal in place, with the European Commission enacting a provision that effectively bans European companies from complying with U.S. sanctions. However, these same companies, including Total and Volkswagen, have essentially ignored the provision and have abandoned Iran for fear of repercussions from Washington.
Iran, at the same time, has insisted that the EU offers real support for the deal and for its economy in these times of trouble, threatening to resume its nuclear program if nothing is done. According to the diplomats who spoke to Reuters, so far the EU has failed to provide this kind of support.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
Comments
The EU has a lot of economic muscle being the largest trade bloc in the world accounting for 22% of the global economy compared with 18% for the US. If the US takes action against the EU for dealing with Iran, the EU will retaliate against the US.
The EU has no alternative but to support continued trade with Iran because if Iran is not satisfied with EU support, it will definitely abandon the nuclear deal altogether. In such a situation, the alternative could be a further escalation of tension between the US and Iran possibly leading to a war engulfing the whole Gulf region.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London