Although the USA reintroduced numerous sanctions against Iran on Monday 5 November, the Europeans continue to defend the nuclear deal and economic relations with Tehran.
In a joint statement on 2 November, High Representative of the EU for Foreign Affairs and Security Policy Federica Mogherini and the E3 (France, Germany, UK) foreign affairs and finance ministers reiterated their commitment to the nuclear deal that they spent long negotiating. "We deeply regret the further re-imposition of sanctions by the United States, due to the latter’s withdrawal from the Joint Comprehensive Plan of Action (JCPOA)", they once again stated.
The Americans have reintroduced sanctions on the energy sector as well as on the maritime transport, shipbuilding and finance sectors. As part of this, over 700 individuals, entities, aircraft and ships will be sanctioned, including more than 300 that were not subject to the sanctions before they were lifted in connection with the JCPOA. Over 50 Iranian banks are involved. "Enterprises throughout the world must know that we will apply our sanctions strictly", warned US Treasury Secretary Steven Mnuchin.
Continuing economic relations despite sanctions
Stating that the Iranian nuclear deal provided for "the lifting of international sanctions in order to have a positive impact on trade and economic relations with Iran", Mogherini and the ministers said in their statement that their aim is "to protect European economic operators engaged in legitimate business with Iran, in accordance with EU law and with UN Security Council resolution 2231".
The Europeans are especially interested in the Iranian oil exports that are subject to sanctions, apart from some exemptions, from 5 November. The US indeed decided to exempt eight countries (including Greece and Italy) from risks of the restrictive measures in order to enable these countries to continue buying Iranian oil for six months. This could damage European unity. According to US Secretary of State Mike Pompeo, these eight countries (the two EU member states, China, India, Taiwan, Japan, Turkey and South Korea) have already considerably reduced their imports of crude oil, cooperated on numerous other fronts and taken important measures to reach the zero crude oil import goal.
The US special representative for Iran, Brian Hook, said that of these eight countries, two have stopped their oil imports and a third has announced that it will do so by the end of the year – but he did not name these countries.
Italy and Greece are not the only member states to import Iranian oil. In 2017, eleven member states imported Iranian oil – Italy, Greece, Austria, Belgium, Bulgaria, Croatia, France, Germany, the Netherlands, Poland and Spain – for a total of €9,988 billion (or 199,968,000 barrels of crude oil). Iranian oil accounted for 5.2% of oil imports in the EU, in other words the eighth country of import.
The joint statement says that the Europeans are committed to working on "the preservation and maintenance of effective financial channels with Iran, and the continuation of Iran’s export of oil and gas". "On these, as on other topics, our work continues, including with Russia and China as participants to the JCPOA and with third countries interested in supporting the JCPOA. These efforts have been intensified in recent weeks, particularly those underpinning the European initiative to establish a Special Purpose Vehicle on which we are proceeding with work to set up", the joint statement says (see EUROPE 12103). The Europeans said that they were continuing to work with Russia and China as participants in the JCPOA and with third countries interested in supporting the deal.
The 'special purpose vehicle' or SPV, that Iran wants in place from Monday, is still being developed at the level of the member states. According to Mogherini and the E3 ministers, this "will (...) allow for European exporters and importers to pursue legitimate trade".
On the US side, the Americans consider this ad hoc structure to be useless. "The SPV is nothing more than a paper tiger", US Ambassador to the EU Gordon Sondland stated. "We have not heard of any serious actor intending to take advantage of the SPV", he added. In Sondland's view, even if this mechanism is set up, there will not be a big enough volume of trade through it. "We have not seen any demand for such a structure", Hook also stated (see EUROPE 12118). Questioned about the possible US sanctions on this structure, the special representative replied indirectly: "the USA will not hesitate to sanction any punishable activity in relation with our sanctions regime against Iran".
The Europeans have already set up a blocking law, which has been operational since 7 August (see EUROPE 12077). According to one source, five companies have asked for an exemption with this law and the files are still being examined. For Sondland, whether it be the SPV or the blocking law, the EU's tools are useless. "I do not believe it will work", he said, adding that many Europeans companies had already chosen to continue their trade with the US rather than with Iran.
What is more, on Monday the global provider of secure financial messaging services, SWIFT, which had been asked by Pompeo to exclude Iranian financial establishments placed on the black list except for "humanitarian transactions", announced its decision to "suspend" the access of certain Iranian banks to its network. SWIFT is based in Brussels.
Further efforts needed
In the face of the US measures, the E3 ministers and Mogherini recognised that "further work must be done to assist and reassure economic operators pursuing legitimate business under EU law". They announced that the French, German and British finance ministers would further pursue this at their next meeting, but no precise date was mentioned. According to one French source, this issue of US sanctions could be addressed informally at the economy and finance ministers' meeting on Tuesday 6 November. "Our collective resolve to complete this work is unwavering", the Europeans said in their statement. (Original version in French by Camille-Cerise Gessant)