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Prime Minister Scott Morrison is considering a review of Australia’s support for the Iran nuclear deal. The news comes after US President Donald Trump announced the US withdrawal in May from what is officially known as the Joint Comprehensive Plan of Action (JCPOA). The US has subsequently begun re-imposing nuclear-related sanctions that had been lifted.
It has proposed to establish a so-called “Special Purpose Vehicle” (SPV) – a non-US dollar dominated payment system – that will facilitate transaction between Iran and EU companies. The EU has also updated its “blocking statute” to allow EU entities to recover damages arising from the re-imposed US sanctions on Iran and nullifying the effect in the EU of any foreign court rulings based on these sanctions. These measures are specifically designed to decrease the dependency of EU companies on the US financial system, and reduce the exposure of EU companies to fines and litigation.
Details on how the SPV will operate are yet to be announced. However, the new measures will certainly not entirely mitigate the risk for EU companies wishing to remain active in Iran. While the SPV would provide for a mechanism to conduct financial transactions, its personnel, the goods traded, and any cash that would fund the SPV could be subject to US sanctions.
Moreover, if the US choses to take a hard line it could decide to sanction any EU company that uses the SPV, including a company’s US employees or US subsidiaries.
Such secondary sanctions would ultimately jeopardise access of EU companies to the US market. This will force companies to make a choice between access to the Iranian market and the US market – 45 times the size of Iran’s. Logically, a large number of companies have already signalled their intent to leave Iran as to not risk access to the US market. Danish shipping company Maersk, French oil company Total, and German industrial manufacturing conglomerate Siemens, to name a few, have all pulled the plug on their activities in Iran.
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