The Trump administration and the European Union are coming perilously close to a major escalation in their already substantial diplomatic and economic rift over Iran. European officials in September announced plans to establish a “special purpose vehicle” to enable financial transactions with Iran to continue after the United States fully restores its sanctions regime in early November. U.S. officials promptly responded by threatening to blacklist European companies and institutions that participate in the vehicle in violation of U.S. sanctions.
Trans-Atlantic tensions are already building over trade policy, climate, and other issues, and the looming fight over Iran sanctions threatens to further reduce potential cooperation on even shared interests. For example, the more energy Washington and Brussels spend quarreling over Iran sanctions, the less likely it is that the two sides will be able to agree on imposing additional sanctions on Russia’s malign activities targeting both Europe and the United States. The fight on Iran also could mean short-term economic pains in the United States and Europe and long-term adverse consequences for America’s economic power.
I met with hundreds of foreign companies when I worked on sanctions as a U.S. State Department official from 2012 to 2014, and those discussions led me to agree with the Trump administration’s assessment that, in the near-term, a European special purpose vehicle is likely to be limited in scope. Europe is designing the vehicle to be a financial conduit that will let Iran move money to pay European companies that are selling European products, and to let European companies pay for their imports of Iranian goods. Europe’s goal is to replace the role that large global banks ordinarily play in handling payments for international trade, given that most major banks will refuse to handle Iran-related transactions after sanctions are fully restored on Nov. 5. Europe has also suggested that the tool might be used by other countries, such as China, to handle financial transactions related to their trade with Iran. However, most large European companies, including oil companies and industrial giants, have far larger business interests in the United States than in Iran and as a result will likely refuse to use the special purpose vehicle to continue trading with Iran, at least initially, out of fear of drawing Washington’s ire.
Read the full article at Foreign Policy.
More from CNAS
CommentarySouth Korea Commits to Combatting Increased Ransomware Attacks
South Korea and like-minded countries should continue to invest in joint cyber operations and criminal investigations to expand their jurisdictional reach and enforcement capa...
By Jason Bartlett
CommentaryReassessing Counter Terrorism Financing in a Taliban-Controlled Afghanistan
The Taliban’s rapid takeover of Afghanistan set back decades-long efforts to integrate Afghanistan into the international community....
By Alex Zerden
CommentaryChina Is Making Smart Money
As a U.S. national security matter, China’s progress in the digital renminbi is more about China’s ambition to harness data than it is about advancing its currency....
By Yaya J. Fanusie & Emily Jin
CommentaryBanished Soviet-Koreans Helped Build North Korea
While Pyongyang touts its reclusive nature as an act of national pride free from foreign influence, the reality is that a collection of outsiders – Soviet-Koreans, in particul...
By Jason Bartlett