Following the snap-back of US sanctions on 5 November 2018, Foreign and Finance Ministers from the UK, France, Germany and the EU published a joint statement in which they expressed their “regret” at the re-imposition of sanctions on Iran by the US and also reiterated their “aim to protect European Economic operators engaged with legitimate business with Iran”. These comments suggest that the EU is determined to continue economic relations with Iran and that the proposed Special Purpose Vehicle (“SPV“), announced by the EU on 24 September, is still under consideration.

Little detail has been forthcoming in terms of how the SPV would work operationally since the EU’s announcement regarding the decision to establish the SPV. At the time of the EU’s announcement, the SPV was described as a legal entity that would facilitate “legitimate financial transactions with Iran” in order to allow European companies to continue trading with Iran despite the threat of US sanctions. It was also suggested that the SPV may be opened to companies in other countries in order for them to engage in Iran-related transactions.

Practically, it is likely the SPV would engage in Iran-related transactions on behalf of companies and the SPV would therefore assume the risks that would otherwise be taken on by individual companies when engaging in Iran-related transactions. Furthermore, we envisage that the SPV would operate outside of the US dollar financial system, especially in light of the Trump administration’s comments on 2 November that the financial messaging service SWIFT could be targeted by sanctions for providing services to Iranian financial institutions. SWIFT has since announced that it will be suspending certain Iranian banks from accessing its messaging system.

However, it has been reported that the EU is struggling to find a country to host the SPV with reports indicating that Austria had refused. As such, the SPV appears to be a long way from creation.