EU faces uphill battle to circumvent US sanctions on Iran

Iran's nuclear head warns of ominous consequences if the EU doesn't protect the economic benefits of the deal

Miguel Arias Canete (R), Commissioner of the European Commission in charge of Climate Action and Energy, and Vice-President of the Islamic Republic of Iran and Head of the Atomic Energy Organisation of Iran (AEOI), Ali Akbar Salehi shake hands during a joint press point in Brussels on November 26, 2018. AFP

Iran's nuclear chief warned the European Union on Monday of "ominous" consequences if it did not follow through with action to keep the economic benefits of the 2015 nuclear agreement alive.

Ali Akbar Salehi said the European Union was "doing its best" after the United States pulled out of the deal and re-imposed sanctions on Iranian oil exports this month, even as the bloc's efforts to salvage trade ties have floundered.

But Salehi, the head of Iran's Atomic Energy Organization, told reporters in Brussels: "If words are not turned into deeds, then ... it is very ominous, the situation would be unpredictable."

The EU and other remaining parties to the accord - China and Russia - hope to convince Tehran to respect the curbs that the deal placed on its nuclear programme, despite Washington's pull-out and the sanctions that aim to force the rest of the world to stop buying Iranian oil.

Striving to circumvent those sanctions, EU nations plan to facilitate non-dollar transactions with Iran. A so-called Special Purpose Vehicle (SPV) would act as a barter system offsetting Iranian exports with purchases of EU goods.

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“If it [the Iran deal] breaks down no sides will benefit, this deal is complementary to the non-proliferation regimes, it could give it support but if it breaks down then the situation will certainly change and everything will be in turmoil,” said EU energy commissioner Arias Canete, adding that the EU needed to “keep it alive”.

“The deal is crucial for the security of Europe, of the region and the entire world to ensure that the Iranian nuclear program remains peaceful.”

Speaking on the sidelines of talks on civilian nuclear cooperation, EU diplomats admitted they could only do so much to urge firms to brave the risk of US penalties and do business with Iran.

"What we are doing now is a lot of symbolism," said one EU diplomat involved in talks with Iran.

"The SPV isn't going to be a game changer," said another EU official. "The prospects are pretty grim."

No EU country has yet agreed to host the SPV and progress in creating it is likely to be slow, despite the political will in Paris, Berlin and London.

"This is a hugely complex and unique undertaking, technical work has been advancing," Europe's Climate and Energy Commissioner Miguel Arias Canete said at a joint briefing with Salehi.

"Nobody should have any doubt on the level of political ambition and determination by the member states involved, in particular, France, Germany and the United Kingdom to swiftly operationalise the SPV."