The European initiative known as the “special purpose vehicle” aiming to facilitate financial transactions between the Green Continent and Iran’s regime – read bypass US sanctions – is very shaky and unstable.
What at first seemed to be a bold rising to the challenge by the European Union has now suffered major and controversial setbacks following a series of foiled, Iran-orchestrated terror plots on European soil, including Albania, France and Denmark. These developments have made EU/Iran political relations all the more complicated, to say the least.
Logically, Iran would need to tone down its foreign bellicosity to allow Brussels present an argument vis-à-vis Washington. However, Tehran’s need to save face back home against its opposition in exile, the People’s Mojahedin Organization of Iran (PMOI / MEK), leaves it no choice but to launch such illogical measures from a diplomatic relations point of view.
That being a broad subject for another day, this piece will provide another perspective into why this EU/Iran initiative will most certainly end in failure.
While introduced a few months ago, the special purpose vehicle (SPV) dossier is facing a conglomerate of obstacles and hurdles. Experts are now asking does this mechanism actually intend to provide the Europeans the means to purchase Iran’s oil and gas while bypassing the ongoing buildup of US primary and secondary sanctions.
“So far, her ‘vehicle’ is stuck in bureaucratic mud, unable to take off as European firms leave Iran in droves,” as described by Benny Avni in a New York Post piece in reference to EU foreign policy chief Federica Mogherini as the SPV architect.
Even media outlets known for promoting a return to the Obama era of US/Iran engagement are voicing growing concerns about the SPV sailing into unknown waters.
“Officials have said they are watching such engineering attempts closely, although few economists and officials in Europe believe such efforts will offer Tehran much in the way of sanctuary from American penalties immediately,” according to the New York Times.
Despite the brouhaha launched in western media by Iranian regime apologists and lobbyists, along with remnants of the Obama-era pro-appeasement voices, the on-the-ground reality strikes alarming reminders for those serious about doing business.
“The European payment mechanism doesn’t shield you if you use the US financial system ... you can pay but don’t expect to be on their Christmas card list,” said Alex Beard, chief executive for oil and gas at Glencore, to Reuters.
Eventually, tensions are rising between Tehran and Brussels, as the Iranian regime’s patience began to grow thin. Iranian Foreign Minister Mohammad Javad Zarif and his deputy Abbas Araqchi have most recently voiced their disappointment in Europe not meeting their expectations to launch the SPV as a lifesaving mechanism against mounting US sanctions beginning to take their toll in crippling fashion.
Finally, the nail in the coffin.
“A special European Union initiative to protect trade with Iran against newly re-imposed US sanctions faces possible collapse with no EU country willing to host the operation for fear of provoking US punishment,” according to another recent Reuters report.
“A bit crazy”
Despite its noisy coming to life, the EU SPV gradually grew to become “little more than a glorified arrangement with limited scope” and even described as “largely symbolic.”
More disturbing for businesses is the fact that the SPV, while aiming to become an alternative to the SWIFT global messaging system, falls miserably short. The SPV will lack the necessary ability to “conduct business in dollars or to access US institutions and the US financial system as a whole,” as explained Joel Gehrke in The Washington Examiner.
Taking this slate of reservations into consideration and all the measures of various parties, the nuts and bolts of Europe’s SPV remains a mystery and even Mogherini failed to provide any actual timetable for its launch.
Adding insult to injury for the EU and Iran is the reluctance shown by a variety of European countries to host the SPV, including Luxembourg, Austria and Belgium, leaving the entire project literally homeless.
At the end of the day, Gordon Sondland, the US Ambassador to the EU, dismissed the planned SPV as “nothing more than a paper tiger.”
In spite of its strong support of the 2015 nuclear deal with Iran, France has yet to make a firm decision regarding the SPV and minister recently told Le Monde the entire idea is “a bit crazy.”
Disclaimer - This author is writing under a pseudonym to protect his identity.