U.S. officials were infuriated last week when Germany, the UK, and France unveiled plans to create a European payments channel to help Iran to avoid U.S. sanctions. Even more surprising was their chosen allies: in announcing their sanctions busting plan, the Europeans were joined by Russia and China.
There has been very little detail provided on the proposed payments channel. The press release describes it as “a Special Purpose Vehicle, to facilitate payments related to Iran’s exports (including oil) and imports.” Nor did EU High Representative Federica Mogherini’s comments after the press release contain much information about the special purpose vehicle’s technical specifications, other than to say that it would be “opened to other partners in the world.”
Despite the lack of particulars, I’ll make some educated guesses in this post about the intended role of the Special Purpose Vehicle (SPV) and how it will be designed. I think that the SPV will probably be able to carve out some space for the rest of the world to engage in Iranian trade, but we shouldn’t overestimate its power. The U.S., after all, wields an incredible amount of economic might and under Trump hasn’t been shy about deploying it.
Trump leaves the Nuclear Deal
The background for the creation of the new European payments channel is the Trump administration’s recent departure from the Iran nuclear deal, officially known as the Joint Comprehensive Plan of Action (JCPOA). This was a deal signed by the France, UK, Germany, U.S., Russia, and China, or the E3+3, in 2015. The JCPOA promised to normalize Iran’s economic relations with the rest of the world in return for fully-audited limitations on Iran’s nuclear efforts.
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