LONDON (ICIS)--Signatories to the Iran nuclear deal are seeking to circumvent the resumption of US sanctions through the establishment of a channel to allow payments for exports from the country, including crude oil.
Ministers from China, France, Germany, Russia, the UK and the EU met in New York on Monday to discuss options to maintain the Joint Comprehensive Plan of Action (JCPOA) with Iran in the face of the US walking away from the deal.
The representatives agreed to develop a special purpose vehicle (SPV) to facilitate payments for Iranian exports once the US sanctions extend to Iran’s banking sector.
The US' first tranche of sanctions was introduced in August, covering sovereign debt issuance and an embargo on the country’s automotive industry, along with measures against acquisition of US dollars by Iranian players.
The next wave, coming in on 5 November, will include petroleum products and foreign transactions with Iran’s central bank.
The SPV proposed by the remaining nuclear deal partners is intended to allow trade to continue with the country, despite US sanctions.
“The participants re-affirmed their continued commitment to … pursue concrete and effective measures to secure payment channels with Iran, and the continuation of Iran’s export of oil and gas condensate, petroleum products and petrochemicals,” the partners said in a joint ministerial statement.
US President Donald Trump warned at the time of the first wave of sanctions that international companies doing business with Iran will not be doing business with the US, raising concerns that players, particularly in the west, would be unable to continue doing business with Iran.
The election of Trump, a vocal critic of the nuclear deal, had a cooling effect on the development of plans to do business in the country, with France's Total one of the few corporates that had moved forward with a project.
The company, however, abandoned its plans once the US formally resumed sanctions.
Participants in the JCPOA meeting noted that they “deeply regret” Trump’s stance, and the creation of a new channel to process payments may alleviate trade gridlocks caused by the reluctance of European banks to back deals with Iran.
“You still can buy Iranian products for euros, but you cannot find banks ready to pay,” said a commodities trader.
It remains uncertain whether new payment methods would allow global players to continue to trade with businesses in Iran, as multinational firms such as BASF and Air Liquide – two of the first firms to express interest in developing capacity in the country – have substantial operations in the US.
Companies from Russia, which is already under sanction itself from the US, and China, currently in the midst of an intensifying trade war with the country, may have less to lose from attempting to continue dealing with Iran than large European firms, according to the commodities trader.
“Some Russian banks are already sanctioned and have nothing to lose… [and] China, due to the open confrontation with the US”, it added.
Additional reporting by Deepika Thapliyal