EU, Iran agree to set up alternative legal trade mechanism to counter US sanctions

The European Union and Iran have decided to set up a legal mechanism to enable trade between the two, in a bid to counter growing US sanctions, Al Jazeera reported.

Federica Mogherini, the bloc’s foreign policy chief late on Monday was quoted by AJ that EU will create new payment channels to preserve oil and other business deals with Iran. The announcement took place after the bloc met with foreign ministers from Britain, France, Germany, Russia, China, and Iran on the sidelines of the United Nations General Assembly in New York.

“In practical terms this will mean that EU member states will set up a legal entity to facilitate legitimate financial transactions with Iran and this will allow European companies to continue to trade with Iran in accordance with European Union law and could be open to other partners in the world,” she told reporters after the closed-door meeting.

The EU, along with Russia and China, said in a joint statement that the so-called “Special Purpose Vehicle” will “assist and reassure economic operators pursuing legitimate business with Iran”.

The statement added that the six countries signatory to the 2015 nuclear agreement “reconfirmed their commitment to its full and effective implementation in good faith and in a constructive atmosphere”.

The Iran nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA), kickstarted in 2015 was pulled to a halt after U.S, citing that the deal didn’t cover other concerns related to Iran- such as its military influence and promotion of international tourism.

A second round of sanctions is set to slam the Islamic Republic’s economy in November, on Iranian oil exports.

Mogherini said on Monday the decision to set up such a vehicle had already been taken and that technical experts would meet again to flesh out the details.

Al Jazeera’s Shihab Rattansi, reporting from the UN headquarters in New York, said the new entity will act as a “clearing house, a middleman, so to speak, between Europeans and Iranians as they try to do business.”

“If the Italians want to buy some Iranian oil, they will wire the money to this entity which will then handle the financial transactions from there and vice versa,” he said.

“There will be no involvement of commercial banks and central banks, both of whom are terrified at the prospect of US retribution if they are seen to be going against US sanctions.”

Rodger Shanahan, a research fellow at the Lowry Institute for International Policy, called the EU agreement “a poke in the eye for the US”.

“I think it reflects the kind of the attitude that the Europeans have had about the decision by President Trump,” he told Al Jazeera in an interview from Sydney, Australia.

“They have been quite upset about going against international norms of pulling out of the agreement. At the same time, all external auditors have found that Iran has been complying with the agreement. So the Europeans want to try and save the agreement and they’re seeing this as really the last chance,” AJ quoted him as saying.

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