The European mechanism for Iran: a secret agreement despite pessimism?

Analysis by PMOI / MEK

Dec. 9, 2018 - On 5 December Iranian media widely reported that France and Germany are working to create a Special Purpose Vehicle (SPV) in order to circumvent the new U.S. energy sanctions against the Iranian regime.

The SPV will work like a clearinghouse which enables the Iranian regime to trade with European countries without money changing hands. In essence, the Iranian regime will be able to “sell” its oil and other exports in exchange for credits that are guaranteed by the SPV and will be able to import European goods paid by the same system.

But the SPV, widely touted as Europe’s rise against the U.S. and its firm stance in regard to the Iran nuclear deal, has failed to produce meaningful results until now.

But according to an article in Al-Monitor that was cited by a wide range of Iranian media, Europe’s Iranian SPV will be operational in January next year. Europeans believe that other countries can also benefit from this mechanism to trade with Iran. This has led to new arguments between the two prevailing factions inside Iran.

Ali Akbar Salehi, one of the top officials in Iranian regime’s nuclear negotiations team that forged the Joint Comprehensive Plan of Action in 2015 and the current head of Iran’s Atomic Energy Organization, said on December 6, “For some time, the Europeans have been committed to helping Iran compensate for the damages it has incurred as a result of the JCPOA and to create a mechanism so that Iran can benefit from the economic conditions of the JCPOA.”

Salehi further went on saying that one of the recommended plans is an SPV which he claims to be in its finalizing phase.

“Given that creating a consensus between 27 members of the European Union is not an easy task, the Europeans have stated that they will put all of their efforts into completing this.” He added, “based on the promises the Europeans have given, by the end of the current year, the European package will be operational.”

In an interview with Japan’s Kyodo News on November 29, Abbas Araqchi, Iran’s deputy foreign minister, was optimistic and said that “new European ideas for trading with Iran are on the way.”

Araqchi virtually begged Europe to prevent the JCPOA from dying and said that “the economic benefits of the JCPOA have decreased.”

“If the current situation continues, this agreement will approach death and European endeavors to protect it won’t produce any results.”

Araqchi said that Europe is the decision-making party and continued: “The European Union needs to guarantee the trading routes with Iran because time is running out fast and our patience is ending.”

Javad Zarif’s deputy also said that there is no potential for any new talks.

On the other hand, in an article published on Nameh News, close to Iranian Supreme Leader Ali Khamenei’s faction, an Iranian pundit, Rahman Araqchi, described the European SPV as being in a coma and called the dream of keeping the JCPOA with the Europeans dead.

He summarizes the SPV as an oil for food program and says: “What the Europeans have declared is that they’ll try to exchange Iranian sold oil for basic goods and transport them to Iran. In some cases, they may even give the money to Iran. Much of the details are still unknown.”

In December, Vatan-e Emrouz newspaper called out Abbas Araqchi for his contradictory statements and wrote: “Last September, Araqchi explicitly said that ‘Europeans have time until November 4 [to come up with an economic solution to circumvent the sanctions] and after this date it won’t do any good for them to do anything.’ One day after the U.S. left the JCPOA, Mr. Rouhani personally reiterated in a phone call with Emanuel Macron that ‘in the current situation, Europe has a very limited opportunity to keep the JCPOA.’

“A few days after this phone call, Zarif’s deputy gave a clearer picture of this ‘limited opportunity’ and said in an interview with German state television that Doctor Rouhani hasn’t specified a time limit or period for us and only said a few weeks. But I don’t believe that the talks will take more than four weeks,” the newspaper continues.

Vatan-e Emrouz adds: “It’s not clear whether these new ideas are any different from the SPV which the Europeans didn’t even show to us and were not ready to host it in their countries. But one thing is very clear: with Zarif and Araqchi at the wheel, not only the sick economy won’t cure, but all of us will fall to the disease.”

A growing skepticism surrounding a European savior that will help Iran to counterbalance the effects of economic sanctions is not limited to conservative circles in Iran.

On December 1, Arman newspaper, close to Rouhani’s faction published an article titled “the limited capacity of Europe’s financial mechanism” and wrote: “France, England, and Germany are trying to keep the JCPOA because of their commitment to it and political and security reasons because the planned European mechanism won’t have much of an economic benefit for them… We also shouldn’t forget that the capacity of the European financial mechanism is very limited.”

Abbas Hashi, an economist close to Rouhani’s faction, said in an interview with IRNA news agency: “This Euro channel isn’t a new invention and it will work similar to the clearing houses during the [Iran-Iraq] war.”

“This time, they want to create a similar channel that may be the same as oil for food,” he added.

One thing is clear: If a deal finally happens between Rouhani’s government and the EU, it will be a last option measure by the Iranian regime since it doesn’t see any other options available.

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