SPV Delay to Inflict Bigger Economic Cost

According to co-chair of Iran-Switzerland Chamber of Commerce, Sharif Nezam-Mafi, the details on SPV's mechanism and method of operation have yet to be revealed. 

Last Monday, the European Union’s foreign policy chief said SPV could be in place by the yearend, according to Financial Tribune.

Federica Mogherini also told reporters: “I would expect this instrument to be established in the coming weeks and before the end of the year as a way to protect and promote legitimate business with Iran.”

EU diplomats had hoped to have the mechanism in place by now but ran into delays, as member states balked at hosting it for fear of being targeted by the revived US sanctions regime against Iran. 

Mogherini did not offer any other details following a meeting of the bloc’s foreign ministers in Brussels, Belgium, but said work on creating the mechanism was “advancing well”.

The translation of the full text of Nezam-Mafi's article published in the Persian daily Taadol is as follows: 

Despite Iran’s mounting pressure on the European Union for the speedy implementation of SPV, it is obvious that the creation of a new financial mechanism, with no previous parallel, is not an easy task. 

Earlier, the EU had tried its hand at building a system to legally support European companies that were ready to take the risk of forging financial ties with Cuba in the face of US unilateral sanctions. The point is what Europe has introduced as SPV is totally different from its Cuban recipe.

The Special Vehicle Purpose, if implemented, would be a financial system like no other in the world. Yet, the timing of its implementation seems to be the main concern of Iranian authorities and traders. The impending Christmas and holiday season are likely to delay the effective date on which the works of the system are to start, which has unsettled Iranians about whether Europeans are really motivated to set up this system or not. 

In other words, the longer it takes to create this financial channel, the bigger will be the cost on Iran’s economy, industries and trade. 

The refusal to host SPV on the part of some countries is an indication of the high risk of standing up against the US for EU member states. Information on the mechanism of SPV is also scarce, but the experience of US penalties on some German and British banks over the previous round of sanctions shows it won’t be possible for major European banks to maintain financial ties with Iran. 

The new financial channel will probably be formed with a newly-established bank with no dollar transactions since almost all banks have financial transactions in dollar and are vulnerable to US sanctions.

The type of commodities that can be traded through SPV is another issue associated with the mechanism. Some believe that Iran will only be allowed to receive revenues from selling its oil via SPV whereas others say Iran’s purchases would be restricted to grains and medicines. 

In addition, ambiguities surrounding the financial mechanism of EU’s trade with Iran have remained unresolved. For example, which one of the involved parties in a deal, seller or buyer, would accept the risk of doing business with Iran? The significance of this question lies in the fact that European buyers seem to be unwilling to bear the current risk of doing business with Iran.