According to Wall Street Journal, senior diplomats said that they were set to launch a mechanism which would enable European companies to circumvent US imposed sanction on Tehran.
They aim to help European companies continue to do business in Iran, despite the sanctions re-imposed by US President Donald Trump announced in May of this year.
One of the two countries will host a corporation which will serve as a payments channel called a special purpose vehicle – SPV, allowing trade to take place without the involvement of European Commercial Banks in order to make and received payments with Iran.
The corporation will be headed by either a French or German individual, depending on which country hosts the SPV. It would be owned directly by European governments in an effort to dissuade US officials from attempting to sanction participating companies.
British officials are said to be weighing up UK involvement in the mechanism. The EU were reportedly trying to involved a further dozen countries, with the potential for involvement of other countries, such as China in the future. They hoped the vehicle could eventually obtain a bank license and become a formalised EU institution, though acknowledged that the SPV would only protect a small percentage of pre-sanction trade between Europe and Iran.
Austria and Luxembourg were both approached to host the mechanism, but declined to as a result of US pressure, European diplomats told the Wall Street Journal. Both countries had previously served as banking back channels for trade with Iran.
However, US Ambassador to Germany Richard Grenell, warned that such work abounds would “not be a smart move”.
“The U.S. will consider sanctions on those entities participating in these tactics,” he added.
The SPV was prompted by European desires to continue doing business with Iran, despite the US unilaterally withdrawing from the 2015 nuclear deal, known as the JCPOA. Iran, and the other European signatories insisted they intended to keep the deal alive without the US, though the US has repeatedly threatened countries that continue to do business with Tehran with sanctions.
Washington announced it was pulling out of the deal in May, claiming Tehran had violated restrictions on its development of nuclear weapons, but both Iran and the European signatories denied that was the case, and insisted they would endeavour to keep the deal alive.
