The European Union, China and Russia, battling to salvage the nuclear deal with Iran after the United States withdrew from it in May, plan to create a system of export loans to stop US sanctions crippling trade with Iran, Handelsblatt has learned.
The planned Special-Purpose Vehicle (SPV) to process trade payments with Iran is to be furnished with a banking license as soon as possible in addition to the bartering system already being discussed, government sources said.
German Foreign Minister Heiko Maas met with his US counterpart Mike Pompeo in Washington on Wednesday but both statesmen failed to find common ground on Iran.
The White House accuses Tehran of posing a security threat. In August, it imposed a round of sanctions targeting Iran’s trade in gold and other precious metals, its purchases of US dollars and its car industry.
The US has announced further sanctions from November 4 targeting Iran’s oil, gas, and financial sectors. Crucially, Washington has warned countries they face penalties if they disregard those sanctions.
The SPV is intended to circumvent the sanctions by balancing out liabilities from Iranian exports and imports. For example, payment for an Iranian oil shipment to Italy could be covered by German machinery exported to Iran. The money due to Iran for the oil will be transferred to the engineering firm that “paid” Iran with its machinery. That will prevent the US from using its clout in the global financial system to impose sanctions outside its borders.
License to barter
No banking license is required for this form of bartering. The Europeans are pulling out all the stops to get the SPV up and running before the new US sanctions come into force next month. But diplomats admit that bartering will only save a relatively small portion of Iran’s trade because exports would always have to be equal to imports for it to be the sole solution (see chart below).
That’s why the SPV is to be given more powers. The Europeans want the SPV to be able to process all payments between trading partners, meaning that it must be able to balance out different sums and different payment durations. For that, it needs a banking license.
In a final step, the EU wants it to be able to grant export loans even for major economic projects.
EU leaders regard the SPV as a priority because Western firms are already abandoning Iran for fear of being punished by US authorities. A “blocking statute” drawn up by the EU threatening European businesses with legal action if they comply with restored US sanctions has so far failed to halt the stampede.
The plans to grant export loans to facilitate trade with Iran is likely to fuel President Donald Trump’s anger at the EU’s resistance to his Iran strategy. German Foreign Minister Heiko Maas tried to calm the waters with a charm offensive in the US Wednesday, launching a series of events headlined “Wunderbar Together” to highlight how close the two nations are.
German-American friendship is “non-negotiable,” Mr. Maas said. “The United States of America remains the Europeans’ most important ally.”
A wunderbar friendship?
The warm words are unlikely to mollify the White House. Washington has taken note of the new US strategy outlined by Mr. Maas in August when he became the first post-war German foreign minister to suggest that America should be treated as a strategic rival in central political questions, and that Mr. Trump’s unilateralism must be countered.
Secretary of State Mike Pompeo, who met Mr. Maas Wednesday for talks on Syria, Iran, and relations with Russia, has already made clear he doesn’t find Europe’s stance wunderbar in the least.
He said last week he was “disturbed and indeed deeply disappointed” at the planned special payment system. “This is one of the most counterproductive measures imaginable for regional global peace and security,” he told a conference. “By sustaining revenues to the regime, you are solidifying Iran’s ranking as (the) No. 1 state sponsor of terror.”
But not every US policymaker agrees with the Secretary of State. Julianne Smith, who was a senior member of Barack Obama’s national security council, laid into Mr. Trump’s foreign policy and backed Germany’s new approach to handling him.
“Maas is responding to Washington’s demands that the Europeans should take more responsibility for their security,” she said. “But every step towards more strategic autonomy is interpreted as a provocation in Washington.”
Formerly Handelsblatt’s Washington correspondent, Moritz Koch is now a political editor in Berlin. To contact the author: firstname.lastname@example.org