Austria rejects EU’s bid for Iran fund in blow to campaign against sanctions

Europe’s efforts to defy US sanctions on Iran by channelling trade through an EUbacked fund suffered a damaging blow after Austria refused to run it from Vienna.

None of the big three countries in Europe that were part of the negotiations for the 2015 deal that lifted sanctions in return for a freeze on the nuclear programme have volunteered for the role.

Last week Paris ruled out taking on the task and the focus had turned to Vienna.

One European official said that the stand-off over the socalled Special Purpose Vehicle was deepening, with efforts to have the fund up and running before the second phase of US sanctions on Iran’s oil trade kicked in on November 4, having been dashed.

“There was a deadline and we missed it,” the diplomat said. “It is proving more complicated than anticipated but there is still determination to get this done. We are committed to it.”

Officials are now believed to be trying to secure a basing and management agreement with smaller member states.

The vehicle is designed to act as a non-dollar clearing house to match revenues from Iranian oil and gas exports to Tehran’s purchases of EU goods, including medicines.

While not exactly a barter arrangement, it would involve a European role in administrating and monitoring Iran’s import trade.

When the concept was agreed in the summer, diplomats hoped the body would be operational early next year.

The vehicle is seen as the linchpin of European efforts to salvage the nuclear accord, from which US President Donald Trump – who took office after the deal was clinched – withdrew in May, calling it flawed in Iran’s favour.

In a separate intervention a senior US sanctions official, Sigal Mandelker, the Treasury undersecretary for terrorism and financial intelligence, said the difficulties could lead to the Europeans reversing opposition to Washington’s squeeze on Iran.

“I’m not concerned about the SPV at all, actually and I do believe that we’re going to find additional mechanisms by which we can work together,” Mr Mandelker said in London. “I very strongly believe that we have a common picture with our European allies.”

Belgium and Luxembourg are now the focus of hopes for a basing agreement but their governments too have expressed strong reservations about the proposal. The reluctance arises from fears that the vehicle’s reliance on local banks to smooth trade with Iran might well incur American sanctions.

“Austria has indeed refused. It’s not dead, but it’s not going in the right direction.

“We are going to try again with Luxembourg, but we’re under no illusions,” a European diplomat said.

Luxembourg was a candidate to manage the Iran vehicle because it has experience setting up a similar mechanism during the 2009 to 2012 eurozone financial crisis.

A US sanctions official said the blow could lead Europeans to reverse their opposition to the US’s squeeze on Iran