How Will Iran-EU Trade Mechanism Be Implemented?

© AP Photo / Ebrahim Norooziveiled Iranian woman walks past a mural depicting the late revolutionary founder Ayatollah Khomeini, and national Iranian flag, painted on the wall of the former U.S. Embassy, in Tehran, Iran
veiled Iranian woman walks past a mural depicting the late revolutionary founder Ayatollah Khomeini, and national Iranian flag, painted on the wall of the former U.S. Embassy, in Tehran, Iran - Sputnik International
According to Mehdi Sanai, Iran's ambassador to Russia, “the European Union is continuing to strive to develop a financial and economic plan for trade cooperation with Iran; this mechanism will be launched in November 2018.”

Nikolai Kozhanov, an orientalist, expert on Iran and associate professor at the European University of St. Petersburg, told Sputnik about the trade mechanism and how it will be implemented. He also explained what measures Iran would put in place to deal with the new sanctions.

The expert said that not all the details of the mechanism have been disclosed yet. But with everything that the EU and Iran have said in this regard, it appears that the new mechanism will be the implementation of an idea tested by Iran in Turkey and China in 2010 and 2015.

"In fact, we are speaking here of creating a global European clearing center where Iran's goods and oil are shipped to a European country, such as Spain; the money is then paid to the structure and the Iranians will be able to use it to buy import goods from any other European country, such as Germany," the academic said.

READ MORE: Iranian Envoy Reveals Launch Time of New EU Trade Scheme to Bypass US Sanctions

"On the one hand, such a system allows for the diminishing of the dollar in the entire financial system, which could potentially be controlled or influenced by the US; and on the other hand, such a clearing center allows for the creation of a closed structure that doesn't give away any information on the buyers of Iranian oil."

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However, the system has certain shortcomings that have to do with sanctions. These shortcomings are related to the fact that money acquired from the sale of goods can only be used within the Eurozone.

"This money can't be taken out of Europe, invested in a country's economy or the economies of some third countries. That means that this money will only be circulating within the EU's borders," Kozhanov said.

The expert stressed that the operation of such a mechanism wouldn't encourage cooperation of large European companies with Iran. "The system is intended for smaller and medium-sized European businesses, because financial operations, for example with Siemens, can be tracked down. Moreover, European entrepreneurs are very afraid of US offshore sanctions," he said.

As for the currency used in the transactions, the Russian expert said "they are likely to be made in euros; and only banks will withdraw from this mutual calculation system." Kozhanov noted that "even if the structure is put under sanctions, it won't be affected much, as the system works independently and only with the Iranians and Europeans."

'Old War' in Modern Conditions

Philippe Bonnecarrere (R),president of France-Iran Friendship Group at the French Senate, Kazem Jalali (C), president of France-Iran Friendship Group at Iran’s Parliament and Delphine O (L), president of France-Iran Friendship Group at the French National Assembly, give a joint press conference in the Iranian capital Tehran on October 21, 2018 - Sputnik International
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According to Kozhanov, while the United States has studied its previous experiences in countering Iran and aims to use a new tactic, Iran and the EU are going to use the same methods they used during "the old war."

The expert believes that this time, Iran should bear in mind that the situation has changed: "Firstly, Iran's traditional neighbors may not be ready to help Tehran bypass sanctions. The Americans have effectively brainwashed the UAE and Baghdad; the Turks have also been warned that they may end up in jail if they collaborate with Iran."

READ MORE: US Treasury in Talks Over Disconnecting Iran From SWIFT Amid Sanctions

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The US is well aware that the most important thing is not even the fact that Iran will be able to sell its oil, but the possibility of Iran to withdraw money from trade with other countries. The clearing center fully satisfies the Americans, because the funds belonging to Iran are going to be locked there, the expert pointed out.

Kozhanov said that the Americans have very good analysts on the economic situation in Iran who are well aware that the country's banking sector is facing major problems. He says it's unlikely that the sanctions will also include those Iranian banks that have nothing to do with the nuclear program.

What Measures Will Iran Take?

Kozhanov believes that the Iranians, despite being innovative, won't be able to come up with a completely new strategy, but will improve on their former tactics.

"Iran hasn't invented anything new, they say so themselves. The Iranian parliament's reports in recent months say that they don't have any new mechanisms. In the past, the Iranians sold their petrochemical products to offset a fall in oil revenue, but now the Americans are saying they should hit the Iranian petrochemical industry, which is one of the loopholes that Iran previously had to bypass or offset sanctions. It will be interesting to see whether the Iranians can think of new ways to try to beat the Americans under these conditions," the expert said.

The views expressed in this article are solely those of Nikolai Kozhanov and do not necessarily reflect the official position of Sputnik.

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