Following Trump’s withdrawal from the 2015 multilateral Joint Comprehensive Plan of Action on Iran’s nuclear enrichment program, and the resumption of extraterritorial sanctions coming up close behind, Europe is left with a sticky situation.
Either they can suit their own interests and express their regret to their American partner, or, vice versa, abide by America’s foreign policy of Iranian isolation and drop all business ties with Iran.
But is there a possible third option? Could Europe maintain its business with Iran and save the nuclear deal without altogether rupturing the transatlantic relationship with America? That might just be possible, although not particularly popular on America’s side of the pond.
As America’s anti-Iran sanctions apply to companies doing business using the American dollar, and given that oil is generally purchased using American dollars, it would seem that Iran’s energy business with Europe is altogether doomed. However, Europe has its own international currency, just without the clout that dollar has. Could the Europeans use their own currency to buy oil and gas from Iran and thereby skirt around America’s extraterritorial impositions?
The European Union is planning to switch payments to the euro for its oil purchases from Iran, eliminating US dollar transactions, a diplomatic source told RIA Novosti.
Brussels has been at odds with Washington over the US withdrawal from the Iran nuclear deal, which was reached during the administration of Barack Obama. President Donald Trump has pledged to re-impose sanctions against the Islamic Republic.
“I’m privy to the information that the EU is going to shift from dollar to euro to pay for crude from Iran,” the source told the agency.
Earlier this week, EU foreign policy chief Federica Mogherini said that the foreign ministers of the UK, France, Germany, and Iran had agreed to work out practical solutions in response to Washington’s move in the next few weeks. The bloc is reportedly planning to maintain and deepen economic ties with Iran, including in the area of oil and gas supplies.
Mogherini stressed that the sides should jointly work on the lifting of sanctions as an integral part of the historic nuclear deal. “We’re not naive and know it will be difficult for all sides.”
The Iran nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA), was sealed three years ago in Vienna between Tehran and the P5+1 powers (China, France, Russia, UK, US, plus Germany). The agreement saw decades-long international sanctions lifted in exchange for Iran curbing its controversial nuclear program. On January 16, 2016, the parties to the deal announced the beginning of its implementation.
The lifting of international sanctions gave Iran access to the world’s markets for the first time in nearly four decades. Since then, Tehran has managed to significantly increase its exports of crude.
However, oil is pegged to the US dollar on international markets, making it difficult for Iran’s partners to make payments for crude and for Tehran to receive them. With the dollar playing the leading role on international financial markets, re-imposing sanctions would mean cutting Iran off from the global financial system.
At the same time, dozens of contracts signed between European businesses and the Islamic Republic could be at risk of cancellation if Brussels obeys Washington’s sanctions. This would damage Iran’s economy and European firms would lose a huge market in the Middle East. Switching to alternative settlement currencies allows both sides to continue trading despite US sanctions.
Generally speaking, any country that wants to buy oil needs to buy dollars first, with which to accomplish the commodity purchase, which is a major aspect of the dollar’s global hegemony in international trade.
The US, in attempting to maintain this, has been resorting to international bullying in its sanctions and financial practices, which, continuing down this path, is only ensuring America’s eventual irrelevance on the global economical stage.
We have seen how this is happening around the world, with China’s introduction of the Petroyuan, Venezuela’s petro, and with bilateral trade deals and banks being erected so as to side step both the dollar and American economic sanctions.
In recent months, Europe has encountered a slew of new economic problems, which mostly seem to be part of the fallout from the nuclear bomb that Trump has become to the European economy.
On a diplomatic note, the choices that are being clearly outlined both here and elsewhere by other European leaders, are that Europe must decide whether its relationship with America comes before Europe’s own intrinsic and existential interests.
The EU must stand up for its own sovereignty and security and economic welfare by standing together and coordinating a cooperative foreign and security polity, and circumventing America, particularly its petrodollar, can be a major part of that stand.