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Mon interview au Financial Times

Europe trips up over plan to beat Washington sanctions on Iran

Alternative to US control of capital markets gives glimpse into a post-globalised world

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It is hard to conceive how the European Commission could have done a worse job of trying to create its so-called special-purpose vehicle for some form of barter trading with Iran. Whenever you seek to avoid sanctions imposed by any country at any time, you do so in the shadows or in some deniable manner.Not Federica Mogherini, the European foreign policy supremo. She held good cards: popular disdain for US President Donald Trump, a readily tradeable commodity (oil) available from her counterpart and a clear objective in defending the Iran nuclear deal, aka the JCPOA (joint comprehensive plan of action).Then she led European heads of government in announcing the prospective formation of the SPV at a press conference outside the UN General Assembly in September. How convenient for the US Treasury’s Office of Foreign Assets Control and the National Security Agency: they had a target to track. Hey, thanks Federica!There are quite a few people in Europe who have an understanding of conducting international trade with unpopular or difficult counterparties. All were quietly shaking their lowered heads at the EC’s performance. Since the press conference, Iranian officials have expressed displeasure at Europe’s “slow progress” in implementing the SPV.The Iranian attitude is understandable. There are so many exceptions and “temporary” carve-outs from the US sanctions that any Levantine or Persian trader could make short work of getting goods and services in exchange for oil. Turkey and Iraq, for example, are exempted from the sanctions on Iran. Undeclared trading across the Iraqi border? It has been done from time to time. Greece has a 180-day “waiver” for its Iranian oil imports. A Chinese refinery may take some Iranian oil and turn it into untraceable diesel or aviation fuel. This is riskier in Europe using the SPV. Hervé Guyader, a Paris trade lawyer, says “this clearing house could upset Donald Trump and . . . expose European companies to another extraterritorial sanction”.So up to now the commission has been unable to find a home for the SPV. Not even a post restante address. No EU country has offered to host it. The sad SPV has been wandering between railway stations and airports, without a nationality, a bank account or even a real name. If I passed it on the street, I would put a euro in its hat. The Americans probably would not care much if the EU uses an SPV to sell a few hundred tonnes of unpasteurised cheese in return for barrels of Iranian oil. They believe it is not sustainable for larger transactions, and in the end is just a vapid statement intended to string along Iran until the end of the Trump administration.It did not have to be this way. Some US officials believe the administration should use the sanctions weapon more judiciously. And most Americans do not like Mr Trump’s provocative behaviour. The EU support for continuing the JCPOA would be more credible if the commission had taken more advice and been less concerned with the “announcement value” of its trade finance strategy.Now, even strained sanctions administrators at the Treasury are prepared. As one person familiar with their procedures says: “There are many more parts involved with this (sanctions-busting) than the commission seems to think. Shipping to Iran is complicated; usually trade has to go by an indirect route. Then there are insurance and reinsurance contracts to cover shipments. Insurance companies will have problems if they touch the US or dollar-denominated markets.“Then there are secondary sanctions on companies or individuals that support trading with Iran. It might be possible for some small and medium-sized enterprises to facilitate some transactions through the SPV, but no major European company will be able to use it.” In short, “there is a limited business to fulfil, but not enough to incent (sic) Iran to stay in the JCPOA or to keep the SPV in business”.All that said, there is the germ of value in the concept of Europe having alternatives to the dollar-based trade system and US control over the capital markets. Arguably the error was in proposing a framework specifically dedicated to Iran. It would have been better to provide the legal and logistical support for more diversified and multilateral enterprises.The historical model would be the “countertraders” or “switch traders” that intermediated transactions with the eastern bloc or with distressed developing countries that had lost normal bank facilities. These started with European capital controls in the 1930s and flourished until the end of the Soviet bloc and easier emerging market credit conditions in the 1990s.Since then, trade and capital flows have greatly expanded. So have US enforcement powers and surveillance capabilities. As Trump and European populists have been saying, though, globalisation is in trouble. The present generation of corporate staff and bankers do not remember the world of trade and capital barriers. Ms Mogherini and the Brussels have a point. It is time to prepare for a world with more walls.




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