European Obstacles to Bypassing US Sanctions and Trading with Iran

Bloomberg reported on Tuesday, June 8, that European governments are facing difficulties in providing protective coverage for banks and companies from EU member states in trading with Iran. These efforts aim to create a reliable shield against US punitive reactions so that companies, especially European banks, are protected from potential fines related to current sanctions against the Iranian government. However, Bloomberg states that these efforts have so far been fruitless due to US opposition. Despite the removal of many sanctions on Iran following the announcement of the JCPOA agreement, large and small companies, as well as financial institutions in Europe, remain hesitant to resume trade with the Islamic Republic, fearing heavy US penalties. US officials, including Secretary of State John Kerry and Treasury Secretary Jack Lew, have repeatedly emphasized that companies, especially European banks, should not be afraid of legitimate trade with Iran. Bloomberg adds that in late May, EU finance ministers, during a meeting with US officials in Brussels, requested clearer guidelines regarding the sanctions regime but were unsuccessful. The news agency cites two European officials who were present at the discussions as sources for its report. Spokespeople for the US Treasury and the European Commission have refrained from commenting on this report. According to Bloomberg, the issue revolves around a $24 billion trade with Iran that faces technical problems related to dollar payment restrictions. Dollar transactions with the Islamic Republic remain one of the punitive measures of the US that continues to hinder the expansion of European trade with Iran. Oil transactions and air transport are typically conducted in dollars, which poses the greatest risks to banks. The prohibition of using the US dollar is currently a barrier to executing contracts such as the sale of 118 Airbus aircraft worth $27 billion, which was announced shortly after sanctions were lifted last January. Arnold Wellerf, head of economic affairs and export control in Germany, told Bloomberg that banks consider the risk of violating US sanctions against the Iranian government to be very significant and that further measures to reduce their liability would be helpful. Bloomberg reports that EU finance ministers have insisted on requesting written guarantees from the US for banks, but US officials have responded that they cannot do more than what they have already clearly stated. Jalil Roshandel, a professor at East Carolina University, attributes the current deadlock and the reluctance of US officials to respond to European allies' requests to legal and political difficulties in the US. Mr. Roshandel told Radio Farda, "Primarily, this request has taken more into account Europe's interests and less the economic or political interests of the US. Europeans want to have an unlimited license while issues between the US and Iran are still not fully resolved; on the other hand, many of these trading restrictions with Iran are not solely from a specific unique center in the US, as some states still have their own sanctions." This political science professor adds that "all obstacles must be gradually removed for the United States to give Europeans a complete green light." Bloomberg states that the insistence of European governments for more assurance from the US actually reflects the pressures from banks that, despite hopes for Iran's return to the global family following the lifting of sanctions, are practically struggling with difficulties. According to an international law firm, more than half of the international companies eager to have trade relations with Iran have currently stepped back due to the fear of getting caught in the web of sanctions. However, Bloomberg, citing the British Foreign Office, added that it is expected that trade between Iran and the EU will quadruple from the current figure of $8 billion over the next two years.