The European Union is vowing to keep trying to set up a new payment system that will allow its businesses to keep trading with Iran despite the U.S. move to reimpose sanctions on Tehran this year.
After high-level talks between EU and Iranian officials at the United Nations late on September 24, the two sides issued a statement saying that they remain determined "to protect the freedom of their economic operators to pursue legitimate business."
The United States in May announced it was withdrawing from Iran's 2015 nuclear deal with world powers and would reimpose economic sanctions on Tehran. But the EU and the other world powers -- Britain, France, Germany, Russia, and China -- all vowed to keep honoring the deal as long as Iran continues to adhere to its curbs on nuclear activities.
With the United States and the U.S. dollar still dominant in much of global trade, the EU statement said a new mechanism or "special purpose vehicle" is needed to "facilitate payments related to Iran's exports [including oil] and imports."
EU foreign policy chief Federica Mogherini, speaking at the UN alongside Iranian Foreign Minister Mohammad Javad Zarif, said the countries were still working out the technical details.
"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," she told reporters.
Several European diplomats told Reuters that the idea is to create a barter system, similar to one used by the Soviet Union during the Cold War, to exchange Iranian oil for European goods without money changing hands.
Mogherini said the plan is "aimed at preserving the [nuclear deal], which is in the international interest."
She said that Iran has continued to comply with the nuclear accord despite the U.S. sanctions, some of which went into effect in August.
Despite months of effort, the EU has struggled to create a legal mechanism to shield its businesses from the U.S. sanctions. The EU has offered measures such as euro-denominated finance lines and a law making it an offense for EU citizens to comply with U.S. sanctions.
But EU diplomats have acknowledged that these measures have not sufficed to reassure companies that they would be protected from potentially large U.S. fines or bans on their businesses in the United States if they continue to do business with Iran.
The announcement of a renewed effort at the UN came on the same day that Reuters reported that the Swedish auto giant Volvo will stop manufacturing trucks in Iran and the French state-owned bank Bpifrance is abandoning its plans to set up a financial mechanism to aid French companies trading with Iran.
Earlier this year, in response to the threat of U.S. sanctions, other major European companies announced they were suspending operations in Iran, including energy giant Total, carmakers Peugeot, Renault, and Daimler, airline companies Airbus, Air France, and British Airways, and German corporate giants Siemens and Deutsche Telecom.