Miguel Arias Canete (R), Commissioner of the European Commission in charge of Climate Action and Energy, and the head of the Atomic Energy Organisation of Iran. Ali Akbar Salehi, Brussels, Belgium, November 26, 2018 (AFP)
Iran has boldly claimed that it will bypass American sanctions through €300 billion ($341 billion) in non-dollar trade with the European Union.
Iran’s nuclear chief Ali Akbar Salehi said on Thursday that the EU will set aside the US dollar and use euros in oil contracts under a Special Purpose Vehicle, agreed in principle with the Islamic Republic this autumn:
Based on the news I recently received and was confirmed by a European commissioner, from now on, the EU is going to ditch the US dollar and just use the euro in the financial transactions of all European oil deals with other countries.
The European Union issued no statement on the matter. However, the European Commission set out plans on Wednesday to reduce dependence on the dollar with the euro as default currency in energy contracts agreed between EU members and third countries, as well as the creation of euro-denominated price benchmarks for crude oil.
Salehi said yesterday, “Previously, the EU used to pay 85% of the money for the oil it purchased from other countries in US dollars, but now with this new mechanism, all the money will be paid in euros.”
Comprehensive US sanctions, including on Iran’s energy and financial sectors, were imposed on November 5. They threaten foreign companies with fines, potentially billions of dollars, if they continue business with Tehran.
The EU has announced support of small and medium enterprises but has struggled to provide guarantees for large firms. That has led some of Europe’s leading companies, such as French energy giant Total, to suspend trade and investment in Iran.
Salehi and Deputy Foreign Abbas Araqchi held talks with European officials in Brussels, Belgium in an attempt to establish the Special Purpose Vehicle.
The nuclear chief said on Thursday, “Based on the pledges that the Europeans have made, we hope that Europe’s proposed package [the SPV] would become operational by the end of the current year.” But he cautioned that it was difficult to get consensus among all 27 EU members.
Luxembourg and Austria have rejected proposals to host the SPV, reportedly fearing US financial retribution. Germany and France are said to be possible alternatives.
Iran’s Rouhani Government is facing a decline of almost 60% in oil exports, from 2.5 million barrels per day in April to 1.1 million bpd in November.
On Tueday, President Rouhani’s senior economic advisor Mohammad Baqer Nobakht estimated that the Government has lost 2/3rds of its funding. The statement was soon removed from official websites.