Europe has no workable plan to protect Iran deal

US too powerful to be defied; sanctions on oil to return on November 4

At a meeting in Washington after Donald Trump pulled out of the Iran nuclear deal in May, a senior US official told European diplomats that their efforts to save the deal by protecting EU investment in the Islamic republic were pointless.

“You can’t,” the official said, and with just six weeks until the next wave of US sanctions hits Iran on November 4. European diplomats acknowledge he was right.

The EU has failed to design a workable legal shield for its companies in Iran to beat the global reach of the US financial system and defy President Donald Trump, the diplomats say.

Instead, Europe is engaging with Russia and China to show that it is at least searching for ways to ensure Tehran gets some benefits from its oil sales so Iranian President Hassan Rouhani has a reason to keep to the accord, according to seven European officials and diplomats.

Facing a collapsing economy at home, Rouhani is in a bind as he addresses the UN General Assembly later yesterday, pressed by hardliners to abandon the 2015 deal as its economic benefits evaporate.

EU-Iranian trade this year is running at €2 billion (Dh8.64 billion) a month, but this is expected to fall as big European companies pull out and Iranian oil exports are choked off by US sanctions.

European heavyweights Peugeot, Renault, Deutsche Telekom and Airbus are among companies that have pulled out of Iran since May. Denmark’s A.P. Moller-Maersk will stop shipping Iranian oil.

The accord, signed in Vienna by the US, France, Britain, Germany, China, Russia and Iran, lifted sanctions in exchange for Tehran limiting its nuclear programme, designed to prevent the country from obtaining a nuclear bomb.

The US Treasury is reimposing sanctions on Iran’s energy, auto and financial sectors in two phases, starting in August.

The EU has tried to neutralise the US penalties with measures such as euro-denominated finance lines and a law that could make it an offence for EU citizens to comply with US sanctions. But these have not reassured companies that they would be protected against US fines or risks to their US-based activities if they did business in Iran, diplomats said.

Now Berlin, Paris, London and Brussels are working on a barter system once used by Moscow during the Cold War to exchange Iranian oil for European goods without money changing hands, using a so-called special purpose vehicle — a company set up to handle the business.