EU's Plan to Continue Trade with Iran Through a 'Special Financial Entity'

Two German media outlets reported on Friday, September 14, that Germany, France, and Britain are working to establish a special financial entity to facilitate trade with Iran following the economic sanctions imposed by Washington against Tehran. According to a report published by Agence France-Presse on Saturday, citing the German economic newspaper Handelsblatt and the magazine Spiegel, this financial entity will act as an intermediary exchange and can facilitate trade between Iranian and European economic parties through the exchange and transfer of financial credits. For example, Iran could send its oil shipment to a company in Spain, but the money from the sale of this shipment would remain as credit with this intermediary financial entity so that if, for instance, an Iranian buyer purchases machinery from a German manufacturing company, this transaction can be settled with the credit from the sale of Iran's oil to the Spanish company. With the operationalization of this intermediary financial entity or exchange, transactions and exchanges will be conducted through the transfer of credit without the need for regular banking operations or cash transfers that would be subject to U.S. restrictions and sanctions. A spokesperson for the German Ministry of Economy and Finance told Agence France-Presse that this plan is one of several options being considered by the European Commission to create independent payment pathways to Tehran, which is currently under discussion. Maya Koutsiantichich, spokesperson for Federica Mogherini, the EU's foreign policy chief, stated, 'The EU aims to ensure that the effects of sanctions are minimized for companies that wish to continue their legitimate business with Iran and that they can access the necessary financial resources.' The United States announced on May 8 of this year that it would withdraw from the JCPOA, but the three European countries, including France, Britain, and Germany, stated that they would maintain the agreement. Iran and the three European countries involved in the P5+1 negotiations to resolve Tehran's nuclear program are consulting to find a solution to counter U.S. sanctions against Iran. Iran has asked Europe to fulfill its commitments under the JCPOA by providing practical solutions to allow Iran to remain in the agreement. A few days ago, Kamal Kharrazi, head of Iran's Strategic Council on Foreign Relations, stated that Europe has 'clearly' failed to meet its commitments under the JCPOA, and if Europe cannot meet 'Iran's needs,' the existence or non-existence of the JCPOA will not matter. Following the U.S. withdrawal from the JCPOA, Washington warned European companies to halt their activities in Iran. So far, several foreign companies have announced that they are ending their activities in Iran. The second phase of U.S. sanctions against Iran will extend to the oil, gas, and petrochemical sectors in mid-November, and Iran's banking network and monetary relations will also be subject to Washington's sanctions. Although several major oil importers from Iran, including South Korea and Japan, have reduced their oil imports from Iran, China and India continue to purchase oil from Iran to some extent. In this context, U.S. Secretary of State Mike Pompeo stated on Friday that the U.S. is still considering the possibility of lifting sanctions or exempting certain countries and companies that continue their trade with Iran after November 4. He reiterated the penalties planned for buyers of Iranian oil after the implementation of the second phase of sanctions while also pointing to India's heavy dependence on Iranian oil, stating that the consideration of granting some exemptions for Indian companies has not been ruled out. Iran's oil exports have continuously decreased in recent months following the U.S. withdrawal from the JCPOA.