As said before, the US policy of sanctions vis-à-vis Iran has put it in diplomatic isolation, forcing its most trusted ally since the Second World War, Europe, in an antagonistic position.
While the reason for this geo-political distance lies in a series of withdrawals and policy reversals the Trump administration has made and done, the case of Iran stands out mainly because the entire US Middle East policy is now focused on Iran, namely the imperative of forcing the later into utmost submission to the advantage of the usurper regime of Israel and the House of Saud. But EU is making sure to stem the tide of US unilateralism not just because the EU doesn’t believe in the US-Israeli rhetoric about Iran’s violations of the deal, but also because the EU wants to maintain a productive relationship with Iran. EU wants to buy its oil and exploit Iran’s big market to its advantage; hence, the EU decision to put in a fresh legal framework to facilitate trade and help Iran bypass US sanctions.
This landmark development took place on the sidelines of the US General Assembly’s annual session in New York when EU foreign policy head Federica Mogherini and Iranian Foreign Minister Mohammad Javad Zarif, announced a “special purpose vehicle” (SPV). The EU head thus explained the SPV, “in practical terms, this will mean that EU member states will set up a legal entity to facilitate legitimate financial transactions with Iran and this will allow European companies to continue to trade with Iran in accordance with European Union law and could be open to other partners in the world.” Mogherini added, importantly enough, this vehicle would “facilitate payments related to Iran’s exports, including oil.”
Needless to say, the creation of this mechanism will also keep JCPOA, intact. On a larger geo-political terrain, the EU now stands in full agreement with Russia and China regarding the necessity of bypassing US sanctions for any transactions and trade deals with Iran. And, it cannot be emphasized enough that by thus placing a legal framework in practice, EU has now made a firm comeback in global geo-politics as an independent player, changing its erstwhile position of always playing a second fiddle to the US.
Accordingly, the EU is no longer mincing words when it comes to taking a stand on the US policy of sanctions. The EU commission has already expressed that they consider the ‘secondary sanctions’ imposed by the US on European companies illegal. According to new rules, put in place in August 2018, European companies, particularly those that do trade with Iran and are in turn sanctioned by the US, have the right to challenge US sanctions in European courts and seek compensation from the US government or American companies. Let’s not forget that the blocking statute, the framework that protects EU companies, isn’t here for the first time. In 1996, this status was issued when the US had put secondary sanctions on Iran and Cuba. Back then, the mere issuance of this statue had forced the US to suspend sanctions. Whether we can expect such a reversal from the Trump administration is not hard to guess due to the overwhelming pressure coming from Saudi Arabia and the child-killer regime of Israel for sanctioning Iran and thus, if possible, cripple its economy. What, therefore, we can expect is a visible institutional EU-US division on Iran.
Equally significant is the possibility that the SPV will allow the Belgium based SWIFT system to be bypassed, preventing the US from interfering as and when it deemed fit, consequently ending up with its dollar de-weaponized. This system, if it gets fully functional soon enough, will thus sync very well with Russian and Chinese policy measures that seek to create a financial system independent of the US influence or interference. Success of this system, therefore, may very well lure Russia and China into its orbit and thus pave way for a new era of financial cooperation between EU and Russia-China and even other reluctant players in the region. For one thing, the SPV will put Euro, instead of dollar, as the chief trade and reserve currency, for another, it will also pave the way for Euro to play a more active role in the global financial system. With EU thus weapon sing its own currency, the currency wars will no longer be played just between China and the US.
Well, this is what the US could expect from Europe: a full counter-attack after Washington’s refusal to allow EU companies doing business with Iran to be exempted from sanctions. This counter-attack is big as it has the potential to completely re-write how the EU deals with the US and how it deals with the rest of the world, including chief US competitors, Russia and China. With the US already in the middle of a trade war with China, a ‘war of attrition’ between the US and EU should bring the anti-US parties closer.
Brussels sets up a ‘special purpose vehicle’ to bypass the US dollar and allow financial transactions with Tehran to continue; history may one day rule this was the fateful geopolitical moment when the European Union clinched its PhD on foreign policy. Let’s remind you that, last week, EU foreign policy head Federica Mogherini and Iranian Foreign Minister Mohammad Javad Zarif, announced at the UN a “special purpose vehicle” (SPV) to deal with the Trump administration’s sanctions on Iran after the US unilaterally pulled out of the JCPOA, also known as the Iran nuclear deal. The SPV, which according to Mogherini “is aimed at keeping trade with Tehran flowing while the US sanctions are in place,” could be in effect before the second stage of US sanctions begin in early November. This single initiative means Brussels is attempting to position itself as a serious geopolitical player, openly defying the US and essentially nullifying the Iran demonization campaign launched by the White House, CIA and State Department. It’s not enough to remember that the JCPOA is a UN-endorsed multilateral deal achieved after years of painstaking negotiations. The other JCPOA signatories apart from Iran and the US – Russia, China and the EU-3 (France, Britain and Germany) – have always been adamant to keep the deal going while supporting Iran on the civilian nuclear energy field. It may have taken a few months, but the EU-3 have finally realized what Moscow and Beijing already knew: any business with Iran – which is in the interest of all players – must bypass the US dollar.
So now we come to a situation where the EU-3 will set up a multinational, state-backed, financial mechanism to help European companies conduct business with Iran in euros – and thus away from US financial enforcers. In parallel, we will have Russia and China doing business with Iran in rubles and yuan. Savvy energy traders knew that BRICS members Moscow and Beijing would continue to do oil and gas business with Tehran. BRICS member India, though, folded under American pressure.
EU diplomats have conveyed to Asia Times a mood of absolute exasperation with the Trump administration in Brussels. A diplomat sums up the sentiment, saying: “We are not going to be bullied by extra-territorial interference anymore. The JCPOA was the first EU foreign policy success. We worked very hard for it, and we are determined that the agreement won’t be undermined under any circumstances.” On the other hand, US national security adviser John Bolton – not exactly a popular figure in Brussels – has vowed to keep imposing “maximum pressure” on Tehran, and is threatening the EU if the SPV is implemented.
For Brussels, preservation of the JCPOA is sacrosanct. It’s directly linked to the credibility of Brussels institutions that are always under siege. If they buckle, a potential disaster in the coming European parliamentary elections in May 2019 will become a certainty.
The game reveals its complexity when we consider that Iran has been the catalyst for the EU to finally stand up to the US – and potentially get closer to Russia and China. What we see emerging is the contours of a possible cross-Eurasia alliance, in multiple fronts, between Russia-China-Iran – the three key nodes of Eurasia integration – and the EU-3.
It’s a game worthy of a Persian chess master: involving energy wars, the balance of power in Southwest Asia, the absolute power of the US-controlled global financial system and the status of the US dollar – bolstered by the petrodollar – as the global reserve currency. All these themes had been lurking in the EU corridors in Brussels for years – with commissioners and diplomats pressing for a more forceful euro in global trade, much as in Beijing in relation to the yuan.
Arguably, a concerted offensive spearheaded by the SPV will lead the euro, the yuan and the ruble to eventually establish themselves as credible reserve currencies. Dollar weaponization, beware. EU finally stood up to US ‘bullying’.
What you heard and read was the excerpts from article authored by Salman Rafi Sheikh, a research-analyst of International Relations and Pakistan’s foreign and domestic affairs, and Pepe Escobar who is correspondent-at-large at Asia Times. His latest book is 2030.