France, Germany Could Host Iranian Payment Vehicle to Side-Step US Sanctions

Despite the rumors that no one is willing to host the trade mechanism over fears of US sanctions, France or Germany have been named as the most viable options.

Either France or Germany might become the host nation for the European clearing house, usually referred to as a "special purpose vehicle" (SPV) — a payment mechanism that would allow European companies to bypass US-imposed sanctions on Iran.

The establishment of this mechanism is widely viewed as the moment of truth on whether the EU is genuinely ready to live up to its promise to keep the so-called Iranian nuclear deal. And, as US sanctions kicked in on November 5, Tehran is becoming more restless regarding the establishment of the SPV, the Guardian notes.

Iranian Deputy Foreign Minister Kazem Sajjadpour has already expressed his frustration at the pace with which the SPV is being set up, saying: "What is lacking is both speed and efficiency."

The SPV would serve as a barter exchange mechanism, using neither US dollars, nor monetary exchanges between EU nations and Iran. Instead, it would utilize "credits" as a form of virtual currency. An Iranian company selling goods to a European firm would accumulate "credits" that could be later used to buy other goods from a different European firm.

There are rumors that no European nation was willing to host the SPV, fearing further ramifications from the US. However, sources close to the process told the newspapers that candidates have come forward, and it is the discussion of the details that has stalled the establishment of the SPV.

For example, it is yet to be determined how a German company operating in the US would be able to avoid secondary sanctions for using the SPV. US Secretary of State Pompeo's recent announcement that some countries will receive temporary waivers from the sanctions further complicates the process.

Failure to establish the SPV would signal Europe's inability to act in defiance of Washington — a blow to the international reputation of the EU and a humiliation for advocates of Europe's independence from the dollar. Supporters of the SPV regard the imposition of secondary sanctions on European companies in pursuit of American foreign policy goals as an illegitimate demonstration of US economic imperialism, the Guardian reports.

So far, the US has appeared dismissive of the idea of the payment mechanism.

"We have not seen much, if any, demand for the SPV. We do not anticipate any significant corporation using a SPV," US Special Representative on Iran Brian Hook said.

Federica Mogherini, the EU's foreign affairs chief, said trade between Iran and the EU was "a fundamental aspect of the Iranian right to have an economic advantage in exchange for what they have done so far, which is being compliant with all their nuclear-related commitments."

According to the 2015 Iranian nuclear deal, signed by Tehran, Washington, London, Berlin, Paris, Moscow and Beijing, Iran agreed to curb its nuclear operations in exchange for the lifting of economic sanctions. However, earlier this year, US President Donald Trump unilaterally pulled the US out of the deal and reimposed sanctions lifted by Barack Obama, claiming that once the deal expires, there will be no legal obstacle keeping Tehran from developing nuclear weapons and no sanctions for it to fear.

The EU nations have opted to keep the deal in place and develop avenues that would allow Iran to trade with them, avoiding the sanctions.