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Can Non-Dollar Payments Help EU Avoid US Sanctions in Trade With Iran?

© AFP 2023 / ATTA KENAREAn oil tanker is seen off the port of Bandar Abbas, southern Iran (File)
An oil tanker is seen off the port of Bandar Abbas, southern Iran (File) - Sputnik International
European countries are discussing the launch of a payments channel to make sure that their companies continue doing business with Iran and keep alive the 2015 nuclear deal with Tehran.

In an interview with Sputnik, former French Ambassador to Iran Francois Nicoullaud was skeptical about the EU's ability to fast-track a mechanism of continued trade with Iran bypassing US sanctions.

The diplomat spoke about the financial and legal hurdles that could hold up the creation of a smoothly working mechanism any time soon.

Newly appointed Iranian Foreign Ministry spokesman Abbas Araghchi addresses the room during a press conference in Tehran - Sputnik International
Iran Expects EU Plan on Bypassing US Sanctions to Be Implemented Before November
“Besides, [EU foreign policy commissioner Federica] Mogherini spoke in the future tense.  In my opinion, one must have patience pending the creation of this mechanism […]. This mechanism was invented to keep the Iran nuclear deal in place and not trade in US dollars. This is the main problem which creates additional risks for companies willing to cooperate with Iran," he said.

This issue is extremely important not only for countries, but also for French and European companies.

Recently, President Emmanuel Macron said that the proposed measures "will not make some major European and international companies, heavily dependent on the US, to rethink their decision to pull out from Iran.

“The US has two ways of punishing a company. First, financially, if the firm uses the dollar. Second, if it is working in a ‘no-go’ area, as most of them are. As a result, a company is only allowed to engage in humanitarian operations such as food supplies, medicine and pharmaceuticals which don’t fall under the US sanctions,” Francois Nicoullaud noted.

This means that the proposed mechanism has in mind small companies and small countries, including when it comes to oil trade.

"As for oil, it is still very difficult to develop a system. Oil is sold for dollars. This is the first problem that this mechanism should help to solve.  However, if a European company buys oil from the Iranians, pays in rupees or any other currency, once the purchase has been done, it falls under US sanctions. The Iranians are looking for a way to get around this, so that their oil can’t be tracked.  If they succeed, it will be possible to buy Iranian oil, which by the time of purchase will have changed many hands and flags, mixed with other oil, etc.,” the diplomat said.

He added that the Americans will try to make the most of their sanctions and ensure that there is no circumvention of sanctions. They want to bring the Iranians to their knees and will do everything they can to prevent any mechanisms that could soften the sanctions’ impact.

When speaking at the UN Security Council on Wednesday, Donald Trump tried to defend his anti-Iranian policy.

When asked if Washington will ramp up pressure on Iran and its partners, Francois Nicoullaud said that despite the strong US pressure on Iran, the main sanctions will come into force in November.

“[Trump’s] speech was mainly about oil sanctions. He said from the very start that his goal was to ensure that Iran cannot sell a single drop of its oil. Japan and some other countries argued that they cannot do without Iranian oil and that they need to buy at least some oil from Tehran. Well, a few exceptions will be made, but there will be few and far between,” he noted.

He mentioned another factor that could come into play – oil prices, because if oil becomes scarce, the price will go up.

“This can be a problem for US consumers and, therefore, a problem for Donald Trump. Everyone wants to win elections and be popular,” Francois Nicullollaud concluded.

The first part of the US sanctions on Iran took effect on August 6, targeting the country’s automotive sector, trade in gold and other vital metals.

The remaining sanctions will snap back on November 4, targeting Tehran’s energy sector, petroleum-based transactions and transactions with Iran’s Central Bank.

READ MORE: EU Mechanism for Cashless Trade With Iran Only Viable for Small Firms — Scholars

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