EU nations have identified Austria as the best candidate to host a special purpose vehicle (SPV) that could handle payments to Iran, according to three people familiar with the negotiations. Austria itself is not so keen. Belgium, Luxembourg and France have also been identified as potential venues but Belgium and Luxembourg have declined while France is looking to Austria, Bloomberg reported.
After discussing the idea with the rest of the government in Vienna, the foreign ministry decided that it “wouldn’t be feasible” for Austria to host the venture, a ministry spokeswoman said.
European governments are searching for ways to make good on their commitments to keep trading with Iran after Trump backed out of the nuclear deal in May. Fresh U.S. sanctions on oil and banking activities kicked in last week, posing a threat to companies that engage with Tehran.
The SPV is a vital part of European attempts to salvage the accord, aiming to circumvent the U.S. sanctions regime and allow companies to continue doing business with Iran. Negotiations are proceeding slowly and no country is keen to host the SPV, which risks drawing ire from the U.S. administration. Where to set up the mechanism is just one of the sticking points.
“This looks nice on paper but it’s hard to do,” EU Commissioner Cecilia Malmstrom said on Wednesday. Two days earlier, Gordon Sondland, the U.S. ambassador to the EU, dismissed the idea as “a paper tiger.”
Euro-area central bankers are wary of the project and the potential consequences of falling foul of American sanctions.
The SPV would theoretically receive payments from countries that want to continue doing business with Iran, either by receiving waivers for oil imports or permissible trade in goods like food and medicine. With no direct transfer of funds between Iran and European actors, it would, theoretically at least, insulate firms from the U.S. punishment regime.
Germany, France and the U.K. are among the countries pushing Austria to host the entity, according to one of the people. Of the other potential venues, Belgium is home to the international financial messaging service Swift, which has reluctantly cut Iran off in response to the American sanctions, while Luxembourg’s low-tax regime has made it a key offshore banking center.
