The European Union on Tuesday announced how it will circumvent U.S. sanctions against Iran. But EU foreign policy chief Federica Mogherini’s plan won’t work.
On paper, it seems clever. Establishing a so-called “special purpose vehicle” or facilitation base for transactions between European companies and Iran, the EU hopes to insulate those companies from U.S. sanctions. Some of those sanctions have already been introduced by the Trump administration, but far more significant sanctions will come into force in early November.
That has Europeans concerned for two reasons. First, because it proffers the loss of billions of dollars in investments. Second, because the EU believes that U.S. sanctions enforcement will lead Iran to extricate itself from the 2015 nuclear agreement.
Regardless, there is very little chance — indeed, likely zero chance — that this gambit will work. Mogherini says that the special purpose vehicle will “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 apparently believes that by shielding European companies under the de facto auspices of EU governance authority, she can stop the U.S. from challenging those companies head on, lest it cause a wider rupture with the EU.
And she’s just wrong. The Trump administration is determined to fundamentally alter Iran’s behavior and possibly even the very nature of the Iranian regime. In turn, President Trump and Secretary of State Mike Pompeo are not going to back away from pressuring Iran simply because the EU is trying to force them into doing so.
Instead, the U.S. will almost certainly introduce sanctions on the EU’s special purpose vehicle. By threatening to sanction any companies that act through the vehicle, and by tracing monetary flows, the U.S. can effectively do what it is currently doing. Which is to say, telling European companies that they can either do business in the Iranian market or the U.S. market, but not both. That will deter European transactions with Iran because the U.S. market is the far more lucrative one.
Nevertheless, this does reflect a growing chasm between Washington and its major allies outside of Israel and Saudi Arabia. Most of the rest of the world now ardently opposes the Trump administration’s Iran policy.
