Companies using a European initiative meant to facilitate trade with Iran face U.S. retaliation, President Donald Trump’s envoy in Brussels said in a warning that casts even greater doubts about the plan’s effectiveness in contending with U.S. sanctions.

“Anyone actually using it to trade on anything other than humanitarian activity is going to be sanctioned by the United States,” U.S. Ambassador to the European Union Gordon Sondland said in a Feb. 7 interview. “We’ll find them and sanction them and they won’t be doing any business with the United States.”

The threat of U.S. action means that the so-called special purpose vehicle “will sit there and will be little used,” Sondland said, adding that it’s a “fig leaf” the European Union offered to the Islamic Republic to salvage the Iran nuclear deal after Trump pulled the U.S. out of the accord and reinstated sanctions.

Germany, France and the U.K. are shareholders of the SPV, which was unveiled last month and is called the Instrument in Support of Trade Exchanges. The initiative is the cornerstone of the EU’s effort to keep Iran from quitting the Joint Comprehensive Plan of Action, which was signed in 2015 and was aimed at constraining the nation’s nuclear activities.

The U.S. pulled out of the deal in May.

‘Maximum Pressure’

Since the U.S. left the nuclear accord, the deal’s remaining powers — China, France, Germany, Russia and the U.K. — have struggled to provide the sanctions relief promised when Iran agreed to limits on its nuclear activities. The mechanism launched by the European nations had faced delays and skepticism that it can successfully persuade companies to trade.

The European action inflamed tensions with the U.S., which called the SPV an attempt to evade its “maximum pressure” campaign on Iran. But the importance of the American market place calls into question whether international business will risk using the new vehicle.

Fear of U.S.

“Most non-US institutions want to avoid running afoul of the U.S. sanctions regime, to avoid the risk of any potential restrictions on accessing the U.S. market,” Doug Davison, a dispute resolution partner and sanctions expert at the lawfirm Linklaters, said in a Jan. 31 statement when the SPV was unveiled. “What happens next will be a true test of how far parties are willing to go to trade with Iran in view of U.S. economic sanctions risk.”

The new financing vehicle will likely be discussed at a meeting next week of the North Atlantic Treaty Organization, which has already come under fire from the Trump administration for members spending too little on defense. The U.S. president had questioned the American commitment to the trans-Atlantic body and was forced to address reports that he privately threatened to leave the post-World War II alliance.

Source » bloomberg