The French, British and German governments aim to keep the Iranian nuclear deal alive by providing financial conduits
By Laurence Norman
Source: Wall Street Journal
BRUSSELS—The French, British and German governments have told Iran they are exploring activating accounts for the Iranian central bank with their national central banks in a bid to open a financial channel to keep alive the Iranian nuclear deal, according to several European officials.
The move is the first concrete sign that Europe could deliver on its promise to take steps to sustain the Iranian nuclear deal, setting European governments squarely against the Trump administration’s Iran sanctions policy aimed at isolating Tehran economically.
Following the U.S. withdrawal from the deal in May, Iran has said it would stop complying with the nuclear deal unless it continues to receive the economic benefits of the 2015 agreement. That deal saw most international sanctions on Tehran lifted in exchange for strict but temporary restrictions on Iran’s nuclear work.
Officials involved in discussions said the option of central banks activating Iranian central bank accounts—or reactivating some which have been dormant for years—is one of several that European governments are actively exploring. The three European governments laid out their plans to Iran during discussions earlier this month among foreign ministers and senior officials in Vienna. Officials said they are still trying to iron out details.
Other European governments, including Austria and Sweden, have also said they would consider doing likewise, the officials said.
However, officials stressed that while discussions have started with central banks, they haven’t yet received buy-in. European central bank officials have said there is reluctance to forge financial links with Iran as the U.S. prepares to reimpose sanctions.
Iran would also need to implement legislation to meet anti-money-laundering standards set by an international watchdog, the Financial Action Task Force, the officials said.
The Bank of England had no comment. The French and German national banks didn’t immediately respond to requests for comment.
Last week, Washington rebuffed a formal European request for the U.S. to give European companies broad exemptions from sanctions, which will seek to minimize Iranian energy exports and the country’s commercial links with foreign businesses.
“Until Tehran is ready to make the tangible, demonstrated and sustained shifts in the policies we have enumerated, we will work to apply unprecedented financial pressure on the Iranian regime,” Treasury Secretary Steven Mnuchin and Secretary of State Mike Pompeo said in response to the European request, according to a letter reviewed by The Wall Street Journal.
The U.S. officials explicitly warned against doing business with the Iranian central bank, saying it “should not be considered a legitimate institution with which European banks—including central banks—should be engaging.”
U.S. officials have repeatedly said that European companies and people could be targeted if they continue doing business in Iran once U.S. sanctions fully snap back in November. U.S. sanctions apply to foreign as well as domestic companies.
With major European companies announcing plans to leave or freeze investments in Iran almost daily, Iran has been pressing for speedy solutions from Europe to lock in the economic benefits of the nuclear deal. Iranian Foreign Minister Javad Zarif has demanded some measures be put in place before the first set of U.S. sanctions is reimposed on Aug. 6, a timetable French Foreign Minister Jean-Yves Le Drian called unrealistic.
However after the July 6 Vienna meeting, Mr. Zarif said he was encouraged by European, Russian and Chinese work on Iran’s key concerns: opening financial channels to Iran and allowing Iran to continue exporting oil.
“Moving in right direction on concrete steps for timely implementation of commitments,” Mr. Zarif said at the time on Twitter.
France, Germany, Britain, Russia and China—the countries that negotiated the 2015 nuclear deal alongside the U.S. and Iran—pledged in Vienna to protect “economic operators” for investing or carrying out “commercial and financial activities,” a reference to possible central bank payment channels, according to European officials.
On Monday, EU foreign policy chief Federica Mogherini said the bloc was determined to follow through despite the U.S. refusal to grant exemptions.
“I don’t see this reply as bringing anything new to the work we’re doing,” she said of the U.S. response.
According to two officials, the hope is that by activating euro, sterling and other-denominated accounts for Iran’s central bank in Europe, Iran could more easily repatriate global oil export revenues—or at least use that revenue to purchase key products, like spare parts for its automobile industry, in Europe.
Most large commercial western banks have refused to open Iranian accounts, fearing that U.S. sanctions would see their access to dollars being cut by U.S. authorities.
While European officials hope that European central banks would be protected from sanctions, they acknowledge there is no guarantee. The U.S. could place sanctions on central bank governors and board members—or even deny them access to U.S. financial markets, though there could be broad economic costs for doing so.
The U.S. already has placed sanctions on Iran’s central bank governor, designating him a terrorist for funneling money to Iran’s Lebanese proxy, Hezbollah.
—Jason Douglas in London, Tom Fairless in Frankfurt and Ian Talley in Washington contributed to this article.