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France Takes The Lead In Protecting Iran Oil Trade From U.S. Sanctions

Tank farm

France aims to lead the European Union (EU) efforts in defying U.S. sanctions on Iran, by supporting the creation of a payment mechanism to keep trade with Iran and making the euro more powerful, France’s Economy Minister Bruno Le Maire said in an interview with the Financial Times.

“Europe refuses to allow the US to be the trade policeman of the world,” Le Maire told FT, adding that the EU needs to affirm its independence in the rift between the EU and the United States over the sanctions on Iran.

The EU has been trying to create a special purpose vehicle (SPV) that would allow the bloc to continue buying Iranian oil and keep trade in other products with Iran after the U.S. sanctions on Tehran return.

The idea behind the SPV is to have it act as a clearing house into which buyers of Iranian oil would pay, allowing the EU to trade oil with Iran without having to directly pay the Islamic Republic.

As the U.S. sanctions on Iran snapped back on Monday, the SPV hasn’t been operational and reports have had it that the undertaking is very complicated and politically sensitive. The bloc is also said to be struggling with the set-up, because no EU member is willing to host it for fear of angering the United States, the Financial Times reported recently, citing EU diplomats.

Related: Oil Prices Slip On Crude, Gasoline Inventory Build

On Monday, the Belgium-based international financial messaging system SWIFT said that it would comply with the U.S. sanctions on Iran and would cut off sanctioned Iranian banks from its network. This was a blow to the EU’s attempts to defy the U.S. sanctions.

The decision by SWIFT highlights the need for an SPV, France’s Le Maire told FT, but he refused to name countries that could host such a special vehicle. Yet, there have been expressions of interest, he told FT.

Meanwhile, the United States has been dismissive of the idea of an SPV, and Brian Hook, U.S. Special Representative for Iran and Senior Policy Advisor to the Secretary of State, said in a press briefing with European reporters on Monday:

“We have not seen much, if any, demand for the Special Purpose Vehicle. I think if you take a look at the over 100 corporations that have decided to choose the United States market over the Iranian market, they’re not looking to avail themselves of any type of vehicle.”  

By Tsvetana Paraskova for Oilprice.com

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  • John Brown on November 07 2018 said:
    When I see Macron trying to stab the USA in the back & profit from helping Iran get nukes it can put on Ballistic Missiles it reminds me that thousands of French collaborated w Hitler & the Nazis, even helping them round up Jews. Macron clearly would have been party of the Vichy regime.
  • Mamdouh G Salameh on November 07 2018 said:
    France and the European Union (EU) have already declared that they will not comply with US sanctions against Iran and they refuse to allow the US to be the trade policeman of the world when the EU accounts for a bigger share of the global economy that the United States.

    It is a matter of time when the EU will have an operational special purpose vehicle (SPV) that would allow the bloc to continue buying Iranian oil and keep trade in other products with Iran despite the sanctions. But have they will.

    The message of defiance expressed by France on behalf of the EU should never be underestimated by the United States. The EU will no doubt retaliate against any US sanctions or retaliations against any of its members.

    Just remember how the German Chancellor Angela Merkel defied threats by president Trump of retaliation against Germany and ordered work to start on the German side of the Nord Stream 2 gas pipeline that will bring Russian gas supplies to Germany and the EU.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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