Europe Bucks America! UK, France and Germany Add Finishing Touches to Alternative Payment Systems
Europe has created a mechanism for circumventing American sanctions against Iran. France reported that a special company has been registered.
Yulia Makarova has studied the details.
— Greetings, Yulia. When and how will the new company operate?
— Good afternoon. We're expecting the details by the end of the week. For now, we know that it'll focus on barter instead of mutual payments.
The European end run is ready. The UK, France, and Germany are finishing the creation of a special payments company that'll protect their trade with Iran from the USA's sanctions. The mechanism will start operating in the coming days said the French Minister of Finance, Bruno Le Maire, during the broadcast of France Inter. He said it would demonstrate that Europe is capable of opposing the major global powers. The company is registered in France, the senior employees will work from Germany, and the management board will reside in Britain, according to the Iranian media.
Vladimir Yurtaev, political scientist: «If such a company that works with Iran, supplies good to Iran, avoids getting targeted by the American sanctions, then we should probably expect the legal space of its activities to be expanded. It might be used as a precedent by any institution that fulfills contractual obligations».
The decision to create a special purpose vehicle was made by the EU in September 2018. First, the loans and payments for Iranian oil were supposed to be transferred to an account of the new company. It would've used the funds to purchase European goods at Iran's request. The company guarantees anonymity and doesn't disclose the names of its partners in order to protect them from the USA's sanctions. All payments were supposed to be done in euros. There was even a plan to create a European analog of the worldwide interbank payment system SWIFT. According to the American media, the barter option is being discussed right now. The Iranian oil will be basically exchanged for food and medicine.
Mikhail Belyaev, RISS expert: «It's not a payment system, but a company that will make barter deals. Barter deals are deals which compose of a direct exchange of goods with no money involved. That's why the words „settlements“ and „payments“ can't be applied to that. Monetary equivalents are only used to assess the volumes».
Using this, Europe is trying to persuade Iran to retain the 2015 nuclear deal despite the fact that the US withdrew from it in May of 2018 and resumed the sanction regime. Iran was hoping that the mechanism would be launched before the end of the year, but it took longer than expected, as no EU country wanted to house the company, fearing a second wave of sanctions by Washington. Tehran attempted to exert pressure on Brussels hinting that the nuclear program would be resumed if the project doesn't progress.
Abbas Araghchi, Deputy Minister of Foreign Affairs of Iran: «This mechanism can't really guarantee anything. It's being designed by Europe to allow their companies that work with Iran to receive payments. It's only a possible instrument, and we aren't even sure that it will function properly».
That's not the desired scenario for Europe. Commodity trade between Iran and the EU was growing in the first three quarters of 2018; a 7.5% increase, which equals almost 15 billion euro. Iranian exports exceed their imports. Tehran proposes to eliminate tariffs and expand the range of goods purchased from Iran.
Vasily Koltashov, political analyst: «More than 20% of the Iranian commodity trade comes from its trade with the EU and there's a trend towards a further increase of those volumes. On the other hand, the company will protect the European investors and give them an opportunity to both trade and enter Iranian territory, the Iranian economy through the investment projects of that buffer company. So, the system is logical and is quite interesting».
Experts point out that China and Russia will also benefit from the new mechanism; they will be able to join it. In addition, it decreases the global usage of the dollar and Moscow advocates for the de-dollarization of global trade. And lastly, Moscow itself is threatened by the new American sanctions. Who knows, perhaps in the future it'll be able to use the new mechanism to protect itself against the restrictions imposed by the US.