US Warns European Entities Against Non-Dollar Trade with Iran

One day after reports emerged that European countries are unwilling to host the special mechanism for trade with Iran, the US State Department warned European entities about non-dollar trade with the Islamic Republic. Reuters reported on Thursday, November 15, that the US Special Representative for Iran warned European companies over non-dollar trade with Iran during a phone call. Brian Hook threatened that European banks and companies that resort to the EU's special mechanism to continue trade with Iran would 'risk new US sanctions.' Reuters quoted Mr. Hook as saying: 'European banks and companies know that we are very serious about enforcing sanctions against this brutal and violent regime.' This stern warning from the US State Department comes just a day after a report indicated that 'no European country is willing to host' the office of the EU's special mechanism due to fears of US sanctions. Previously, Europe had asked Austria to host this entity, but Vienna rejected the request. Reuters reported on Wednesday that now major European powers including the UK, France, and Germany will pressure the small country of Luxembourg in Northern Europe to agree to host this entity. However, prior to this, Bloomberg reported that Luxembourg and Belgium had rejected the proposal to host the special financial mechanism before Austria. Thus, Brian Hook's new warning to Europeans will complicate matters for the EU, which is trying to fulfill its promise to help Iran, and will also increase pressure from the Islamic Republic on this union. This comes at a time when negative perceptions of Europe and its weakness against the US are increasing day by day within the Iranian government. In this context, it is worth mentioning the position of the head of the National Security Commission of the Iranian Parliament, who criticized the EU for its 'hesitation' just hours before the US warning. Details of the EU's special financial mechanism for trade with Iran (SPV) state that: 1- The SPV is supposed to conduct transactions between European companies and their Iranian business partners in a way that is not transparent to American officials. 2- This mechanism is intended to operate like a barter system, allowing Iran to receive goods and technology it needs in exchange for selling oil using a credit account. 3- The EU further explained on its website that it intends to provide export loans through the SPV to facilitate large economic projects in Iran. 4- The text adds that since some Western banks may suspend transactions related to food and medicine to Iran out of fear of sanctions, the European special mechanism will attempt to facilitate humanitarian transactions as a financial tool. The head of the National Security and Foreign Policy Commission of the Iranian Parliament also described Iran's relations with Europe as 'always lukewarm,' which 'has had no practical effect in countering Iran's sanctions.' This position should be considered alongside another comment from Brian Hook on Thursday, who stated that 'any major European company will ultimately prefer the US market over the Iranian market.' This confidence was previously echoed by a senior US official in a different manner. Sigal Mandelker, the Deputy Secretary of the Treasury, stated earlier this week: 'I am not at all worried about the European special financial tool for trading with Iran. I believe we will find other ways to cooperate with Europe.' The issue of the European special mechanism for non-dollar trade with Iran is very sensitive because the Islamic Republic has threatened to withdraw from the nuclear agreement known as the JCPOA if it does not benefit from the economic and trade advantages of the agreement with global powers. Meanwhile, Europe is concerned that the collapse of the JCPOA could empower hardliners and increase Iran's aggressive activities in the Middle East. The re-imposition of US sanctions against Iran is part of a broader effort by Donald Trump, the President of the United States, to compel Iran to abandon its nuclear and missile programs, as well as to cease support for Tehran's proxy groups in Yemen, Syria, Lebanon, and other parts of the Middle East. Mr. Trump withdrew the US from the six-power agreement with Iran known as the JCPOA on May 8, and in mid-July and November of this year, he reinstated the sanctions that had been suspended as a result of the JCPOA. These sanctions primarily target oil exports and the financial sector of Iran, especially 50 banks and their subsidiaries.