Trump administration ‘closely following’ efforts by EU to circumvent Iran sanctions

“As the president has made clear, entities that continue to engage in sanctionable activity involving Iran risk severe consequences,” the U.S. State Department told JNS.

A large pile of Euro currency. Credit: Images Money/Flickr.
A large pile of Euro currency. Credit: Images Money/Flickr.

The U.S. State Department said it is “closely following” efforts by several European countries that have reportedly set up a mechanism in order to facilitate business with Iran that would circumvent U.S. sanctions.

“We are closely following reports about the SPV [special-purpose vehicle] to gain additional details about the mechanism,” a U.S. State Department spokesperson told JNS. “As the president has made clear, entities that continue to engage in sanctionable activity involving Iran risk severe consequences that could include losing access to the U.S. financial system and the ability to do business with the United States or U.S. companies.”

The spokesperson added, “We do not expect the SPV will in any way impact our maximum economic pressure campaign.”

Earlier this week, the U.S. put the E.U. on notice to not evade sanctions on Iran, and on Thursday showed no signs of backing down.

Set up by Germany, the United Kingdom and France (the three European signatories of the 2015 Iran nuclear deal, collectively referred to as the E3), the Instrument in Support of Trade Exchanges, or INSTEX, enables European nations to still do transactions with the Islamic Republic despite U.S. financial sanctions.

“This is an important step and a political signal by E3, who feel duty bound to uphold the Iran nuclear deal as long as Iran fulfills all its obligations as set out in the treaty,” German officials told German international broadcaster DW. “The E3 have emphasized their aim of facilitating legitimate trade relations with Iran.”

Iranian Deputy Foreign Minister Abbas Araghchi told state media that INSTEX is “a first step taken by the European side … We hope it will cover all goods and items.”

The European Union has repeatedly expressed opposition to the U.S. withdrawing last May from the 2015 Iran nuclear deal in addition to reimposing sanctions along with slapping on fresh economic penalties, and therefore has sought to help Iran cope with U.S. sanctions.

The Brussels-based Society for Worldwide Interbank Financial Telecommunication, or SWIFT, blocked Iranian access to the international financial transaction system shortly after America reimposed its second round of sanctions in November. Iran will still be able to access SWIFT for solely humanitarian purposes.

Behnam Ben Taleblu of the Foundation for Defense of Democracies told JNS that this development demonstrates European defiance in combating the Iranian threat.

“By establishing the SPV, the E.U. is sending the Trump administration the wrong signal. It is signaling a willingness to continue to have trans-Atlantic Iran policy be divided, as well as lack of interest in cooperation over checking the world’s foremost state sponsor of terrorism,” he said. “All eyes are on Tehran now to see what sort of entity they place on the receiving end of this system, if they will be placated by the mechanism, and to see if they will continue to press their case against Europe for more of an economic lifeline.”

“Thus far, the Trump administration has correctly assessed that the SPV will likely not impede the maximum pressure policy on Iran given the mechanism’s reported inability to process significant transactions, such as those over oil,” added Taleblu. “But the E.U.’s willingness to craft such a system in defiance of U.S. financial and political pressure could foreshadow the continent’s willingness to entertain a potential economic conflict over a much larger foreign policy problem in the next few decades.”

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