Mogherini: Special Financial Mechanism for Trade with Iran to Be Ready by Year-End

The EU's foreign policy chief states that a special financial mechanism for non-dollar trade with Iran will be ready by the end of this year. Federica Mogherini said on Monday, December 10, 'I expect this tool to be ready in the coming weeks, before the end of the year, as a way to protect and promote legitimate trade with Iran.' She did not provide further details but added that 'things are progressing well.' The calendar year ends on December 31. The EU mechanism, known as the 'Special Purpose Vehicle' (SPV), is designed to circumvent U.S. sanctions against banks involved in transferring money for Iran's oil exports. The SPV, which could be linked to a barter exchange system, utilizes an intermediary entity in the EU to conduct trade with Iran. This mechanism ensures that, for example, the money from Iran's oil exports to European countries is compensated by the sale of goods and services from Europe to Iran. Despite six months having passed since the U.S. withdrawal from the nuclear deal with Iran, the EU's special mechanism for continuing trade with Iran has yet to be implemented. European countries are keen to preserve the nuclear deal with Iran and are working to create a financial channel to maintain financial and banking transactions with Iran. The main issue causing this delay is the reluctance of European countries to host this special mechanism due to 'heavy pressure' from the U.S. There is a concern that U.S. sanctions could extend to the host country of this mechanism. Austria and Luxembourg are among the countries that have shied away from hosting this mechanism. However, Amir Hossein Zamani-Nia, the Deputy Minister of Oil for International Affairs, indicated on November 19 that France is likely to host this financial channel. Meanwhile, Reuters reported, citing two diplomats, that Jean-Yves Le Drian, the French Foreign Minister, announced in a closed-door meeting in Brussels that Paris and Berlin are working on this plan to be operational by the end of the year. Iranian officials have repeatedly threatened that if Iran does not benefit from the nuclear deal, there will be no reason to remain in it. In this context, Ali Akbar Salehi, head of Iran's Atomic Energy Organization, warned the EU on November 27 that Tehran's patience regarding the EU's promises for continuing oil transactions despite U.S. sanctions is running out. Mohammad Javad Zarif, the Foreign Minister, also hinted to European countries on November 23 that 'you cannot swim without getting wet.' U.S. sanctions have had severe effects on Iran's economy, reportedly reducing Iran's oil production by over a million barrels. At the same time, the prices of various foreign currencies have skyrocketed, leading to inflation affecting many goods and services in Iran. The Trump administration claims it seeks a comprehensive agreement with Iran that includes not only nuclear issues but also missile programs and Tehran's 'destabilizing' role in the Middle East. Iranian officials have rejected any negotiations with Washington and have called for the U.S. to return to the nuclear deal. Concurrently with the discussion of the special mechanism at the EU Foreign Ministers' meeting, the possibility of sanctioning the Islamic Republic of Iran over alleged involvement in bombing plots in Paris and Denmark was also raised. Mogherini, in another part of her remarks on Monday, stated, 'Our strong support for the implementation of the Joint Comprehensive Plan of Action (JCPOA) does not mean we will turn a blind eye to other issues.' She referred to the EU's support for France and Denmark, which she said have witnessed 'illegal activities by Iranian affiliates,' and noted that this issue was emphasized at the EU ministers' meeting. However, Mogherini did not specify whether any decisions were made regarding sanctions on Iran due to these activities. The EU's foreign policy chief also deemed direct talks with Iran on regional issues important, stating that these discussions are ongoing between Iran and four countries: Italy, Germany, France, and the UK, with the Yemen crisis being the starting point. Currently, Iranian-backed Houthis, who control Yemen's capital, are negotiating in Sweden with the legitimate government supported by the UN and the Arab coalition led by Saudi Arabia to find a resolution to the country's ongoing civil war. Sweden is hosting these negotiations.