Diplomats: No European Country Will Host Trade Mechanism with Iran

Reuters has reported that Europe is trying to establish a special mechanism for non-dollar trade with Iran, but no European country is willing to host such an entity due to fears of U.S. sanctions. On Wednesday, November 14, six diplomats reported that the unwillingness of European countries to host the trade mechanism may undermine Europe's plans to maintain trade with Iran after U.S. sanctions. Previously, Europe had asked Austria to take on the hosting of this entity, but Vienna rejected the request. According to diplomats, major European powers including Britain, France, and Germany will pressure the small country of Luxembourg in Northern Europe to agree to host this entity. However, Bloomberg had previously reported that Luxembourg and Belgium had rejected the hosting proposal before Austria. The issue of non-dollar trade with Iran is very sensitive because the Islamic Republic has threatened to withdraw from the 2015 nuclear agreement if it does not benefit from the economic and trade advantages of the deal with global powers. Europe intends to create a mechanism that allows it to continue trade with Iran and purchase oil from the Islamic Republic without using the dollar. This mechanism will allow Iran to import food and goods in exchange for oil exported to Europe. Europe plans to legally establish this mechanism this month, but its practical operation will begin next year. Diplomats have told Reuters that in the absence of the dollar, no foreign currency has been proposed for the payment system within the framework of the special mechanism. The issue of non-dollar trade with Iran is very sensitive because the Islamic Republic has threatened to withdraw from the 2015 nuclear agreement if it does not benefit from the economic and trade advantages of the deal with global powers. Reuters reports that the U.S. has repeatedly stated that it will impose strict oversight and control over its sanctions against Iran to pressure Tehran into negotiations. Luxembourg and Belgium are currently two potential options for hosting the trade mechanism, but diplomats have said that while these two countries have remained publicly silent, they have previously expressed strong opposition to this issue to European officials. This mechanism will depend on local banks in the host country, but these banks may face U.S. punishment and sanctions, and the United States could cut off their access to its financial system. Luxembourg had previously taken on the establishment of a similar mechanism for Eurozone countries during the global economic crisis from 2009 to 2012 and has experience in this area, but does not want to take on such responsibility regarding Iran. Europe is concerned that the collapse of the JCPOA could lead to the rise of hardline factions and increased aggressive movements by Iran in the Middle East. Diplomats have told Reuters that Federica Mogherini, the EU's foreign policy chief who led Europe in the JCPOA negotiations, has asked several countries to accept hosting the trade mechanism with Iran. 'No country has stepped forward yet. If we do not find a host, we will be in trouble.' Ali Granmaie, a senior expert at the European Council on Foreign Relations, recently tweeted that Germany and France, as the leading powers of the European economy and members of the nuclear negotiation team, should take on a larger role in the trade mechanism with Iran, and if they cannot make progress, it will be a disaster for Europe's credibility. Reuters states that these countries do not want to host the mentioned mechanism with Iran themselves. Diplomats have told Reuters that this mechanism will not, by itself, preserve all aspects of trade between Iran and Europe and will initially be more symbolic than practical. Simultaneously with Reuters' report, the Iranian Trade Development Organization published a seven-month report on Iran's non-oil trade, indicating a decline in trade between Europe and Iran. During the mentioned period, EU exports to Iran decreased by 17% to $5.333 billion. Iran's exports to Europe also showed a 7% decrease, reaching $714 million.