The European Union's Failure to Launch Special Trade Mechanism with Iran Amidst the Return of Sanctions

While the United States announced details of its sanctions against Iranian financial, economic entities, and individuals on Monday, three European diplomats say that the European Union has still failed to find a host for its special trade mechanism with Iran. The European special mechanism for trade with Iran was supposed to symbolically start operating yesterday, but two days after the announced date and the announcement of details of Iran's sanctions, the EU has not yet commented on its plans regarding this matter. Both Iran and the EU hoped that this special mechanism would be operational before the return of US banking sanctions on November 5, and Iran had threatened in October that if this mechanism was not effective, it would withdraw from the JCPOA. On Friday, November 2, when the US announced the return of its second round of sanctions against Iran, Federica Mogherini, the EU's foreign policy chief, emphasized in a joint statement with the foreign and finance ministers of three European powers involved in the JCPOA the efforts to launch this special mechanism. The EU hoped that this special mechanism, designed to counter US sanctions against Iran, would be ready for launch by Monday, the time of the implementation of US sanctions against Iran. However, Reuters reported on Monday, citing European diplomats, that no European country has volunteered to host the entity that is supposed to lead this special mechanism. The report indicated that Ms. Mogherini had previously asked several European countries to consider hosting the headquarters of this special mechanism. Reuters noted that while the European Commission did not comment on this matter on Monday, Pierre Moscovici, the EU's economic commissioner, emphasized that the resumption of US sanctions against Iran is 'not approved by the EU.' On Monday, shortly after the announcement of the details of the return of US sanctions against Iran, Brian Hook, the US special envoy for Iran, warned of the risks that could affect European companies, stating that any country hosting the European special mechanism for trade with Iran could potentially be subject to US sanctions. Mr. Hook emphasized during a conference call with European journalists on Monday that the US does not hesitate to sanction any sanctionable activity related to Iran's sanctions regimes. The EU's special mechanism for trade with Iran includes an exchange system that is supposed to bypass the US financial system by relying on EU intervention in managing trade with Iran. This mechanism could, for example, ensure that the price of oil purchased from Iran by European buyers is paid with goods and services of equal value. However, uncertainties remain regarding the EU's special mechanism for trade with Iran. Reuters, citing a senior French diplomat, reports that Paris is confident that this mechanism will be legally ready for implementation soon, but there are prerequisites that must be met first. He stated that they hope the necessary legal tools will be provided in the coming days, and after that, it will take several weeks or months for the working conditions to finalize, and the implementation of this mechanism will be operational in 2019. Meanwhile, Brian Hook stated on Monday that, from his perspective, European companies are reluctant to use this special mechanism as they prefer to invest in the United States. He mentioned that if you look at more than a hundred companies that have decided to choose the US market over Iran, they are not looking to benefit from any mechanism, as they are satisfied with continuing their activities in the US. After the US withdrawal from the nuclear agreement, the EU, along with China and Russia, hopes to encourage the Islamic Republic to remain in the JCPOA by supporting trade with Iran. Since then, the so-called special mechanism for trade with Iran has been one of the initiatives proposed by the EU to guarantee trade relations with Iran. Other initiatives of this union, such as resorting to 'blocking regulations,' using the European Investment Bank to fill the gap left by private banks, and obtaining exceptional licenses for European companies present in Iran, as well as creating special accounts in the central banks of European countries in the name of Iran, have so far gone beyond promises and commitments.