A Humanitarian Special Purpose Vehicle
Drawing from discussions held at the 5th Europe-Iran Forum on May 14 in Paris, France, this report argues that in creating a special purpose vehicle for Iran trade, Europe should constrain the initial focus of the entity on humanitarian goods, creating a humanitarian special purpose vehicle or H-SPV. In doing so, Europe can be more ambitious in the mechanism used by the H-SPV to facilitate Europe-Iran trade and investment in the face of U.S. secondary sanctions. The report is a joint publication of the European Leadership Network and Bourse & Bazaar.
Download
November 2018 - 16 Pages
Please enter your email address in order to download the full report.
Executive Summary
By Esfandyar Batmanghelidj and Axel Hellman
The US withdrawal from the Joint Comprehensive Plan of Action (JCPOA) and ensuing “maximum pressure” campaign against Iran has led to a diplomatic clash with the European Union and a quorum of its member states who are striving to protect the nuclear deal. At this point, competing US and European interests and policy initiatives have not only created friction over the JCPOA and Iran policy writ large, but also driven a wedge in transatlantic cooperation in a crucial theater for both European and US security policy.
There is, however, one issue on which US and European officials seem to be in agreement: that the Iranian people should be spared from the hardships of economic sanctions. Senior officials in the Trump administration have consistently emphasized that US sanctions are targeted against Iran’s leadership and not its ordinary citizens. If genuine, such statements point to one potential area of cooperation between Europe and the United States: ensuring that humanitarian trade can persist even under stringent US sanctions on Iran.
This new report by Esfandyar Batmanghelidj and Axel Hellman argues that the establishment of an humanitarian special purpose vehicle, or H-SPV, could help Europe achieve several goals:
First, it would allow Europe to demonstrate its ability to sustain vital trade with Iran in the face of US sanctions. The H-SPV can be brought online faster, more reliably, and with a clearer direct impact on the wellbeing of the Iranian people than a general SPV.
Second and related, the H-SPV would advance European economic sovereignty.
Third, the H-SPV would serve as a test to the US commitment to protect humanitarian trade. If the US accepts to join the H-SPV, Europe will have effectively neutralized the issue of compliance fears that might linger around any Iran-specific mechanism. If the US refuses, Europe will be further justified in pressuring US authorities for licenses and other measures that will provide comfort to its banks regarding the SPV.
Fourth, the H-SPV could prove innovative for sanctions policy. The experience of establishing multilateral mechanisms to sustain humanitarian trade will be invaluable in a world where the imposition of unilateral sanctions looks increasingly likely.
To achieve these goals, the H-SPV should be established in accordance with these criteria:
It should focus exclusively on humanitarian trade.
The focus on humanitarian trade would enable a functional linkage of the H-SPV to European banks, including European central banks. In this role it could serve as a kind of trading house, able to serve as an intermediary on behalf of European and Iranian companies.
While an SPV focused on trade considered sanctionable by the US is unlikely to develop far beyond the netting service currently envisioned, the H-SPV could develop into a “gateway bank” which serves as an intermediary between the Iranian and European financial systems.
While the H-SPV would be foremost intended to serve European companies, the mechanism could be opened to other trading partners, such as China and India. Europe should also invite the United States to participate in recognition of a shared commitment to ensure that the Iranian people are not unduly harmed by sanctions.
The findings of this paper are informed by discussions held at Bourse & Bazaar's 5th Europe-Iran Forum, held on November 14 in Paris, France.
A New Banking Architecture in Response to US Sanctions
Drawing from discussions held at the Iran Financial Future Summit on May 29, this report outlines a "new banking architecture" to facilitate Europe-Iran trade and investment in the face of U.S. secondary sanctions. At the center of this architecture is the creation of an "EU-OFAC," a regulatory body that would support measures in compliance and legal protection. The report is a joint publication of the European Leadership Network and Bourse & Bazaar.
Download
June 2018 - 24 Pages
Please enter your email address in order to download the full report.
Executive Summary
By Esfandyar Batmanghelidj and Axel Hellman
On May 8, U.S. President Donald Trump announced that the United States would unilaterally withdraw from the 2015 international nuclear agreement with Iran, known as the Joint Comprehensive Plan of Action (JCPOA). The Trump administration is now set to pursue a “maximum pressure” campaign against Tehran. As part of this approach, all U.S. sanctions lifted pursuant to the JCPOA will be re-introduced, the few licenses enabling certain exemptions to U.S. sanctions will be revoked, and “additional economic penalties” will be devised.
From the Iranian perspective, the return of U.S. sanctions means a lost opportunity for growth and international engagement, but not an impending economic catastrophe. From a European perspective, sustaining economic exchange with Iran is not about advancing economic gains but rather about consolidating an agreement which is driven by pragmatic security concerns. The shared elements are clear—Iranian and European policymakers alike are foremost motivated by a need to salvage the JCPOA and thereby protect their economic sovereignty and autonomy in international relations.
To support these ends, this paper presents a vision of a new banking architecture that must be at the heart of Europe’s package to protect Europe-Iran economic ties. This banking architecture should be designed not to evade US sanctions, but to ensure that those companies that can operate in compliance with U.S. secondary sanctions have access to the necessary banking services.
The design of this architecture should be presented to Tehran not as a “turnkey” initiative that can simply be switched on, but rather as a part of a comprehensive “roadmap” for joint European and Iranian implementation, in pursuit of expanded economic relations.
The architecture should have two main elements:
It should be centered on “gateway banks”—financial institutions which can serve as intermediaries between major Iranian and European commercial banks.
It should be overseen by an “EU-OFAC,” a regulatory authority modeled on the U.S. Treasury Office of Foreign Assets Control, but with a philosophy of operation geared towards facilitation of trade rather than restriction.
EU-OFAC would pursue measures in two domains:
Compliance:
EU-OFAC would develop common standards, tools, and certification mechanisms for due diligence to enable European businesses and banks to have greater confidence about the compliance of their activities, thus addressing a longstanding issue with the interpretive guidance issued by the United States.
Drawing on a successful model developed in Germany, EU-OFAC would supportcollaborative efforts to increase the reliance on and reduce the costs of duediligence among the gateway banks.
EU-OFAC would also assist European companies in seeking waivers and exemptions from U.S. authorities and act as an interlocutor between European companies andU.S. authorities.
Legal Protection:
EU-OFAC would strengthen EU legal protections for entities engaged in Iran trade and investment by developing guidelines related to a strengthened blocking regulation, creating linkages to laws that underpin the Single European PaymentsArea (SEPA) and to non-discrimination in the provision of banking services.
The findings of this paper are informed by discussions held at Bourse & Bazaar's Iran Financial Future Summit on May 29, 2018 in Brussels, Belgium.
