EU, China and Russia in move to sidestep US sanctions on Iran: Special Purpose Vehicle aims to keep Iran in 2015 nuclear deal with barter systemFederica Mogherini, the EU external affairs chief, said the SPV was designed to facilitate payments related to Iran’s exports – including oil – and imports, so long as the firms involved were carrying out legitimate business under EU law. The aim is to make the SPV available not just to EU firms but to others ... it could underpin a sophisticated barter system that can avoid US Treasury sanctions ... without any funds traversing through Iranian hands or the banking system. A multinational European state-backed financial intermediary would be set up to handle deals with companies interested in Iran transactions and with Iranian counter-parties. Any transactions would not be transparent to the US, and involve euros and sterling rather than dollars. The proposal is additional to a blocking statute passed by the EU in August that theoretically makes EU companies immune from sanctions imposed by the US in pursuit of its Iran policy.
Well. The technology exists, for sure (the City can do this stuff standing on its head, as I've often said whenever the EC claims it will "ban London from dealing in Euros"). A total return swap (TRS) is a clever, flexible device with many uses in creative hands. It's quite interesting that anyone's even trying, on such a scale.
But. The fact is, no company I've ever met will trifle with US sanctions in any way, however much is is intended to be "not transparent to the US". Case in point: I was involved in a deal over the summer where a particular asset was in play. The asset is in Europe; the main parties concerned are a very big UK co, a very big French co, and an Iranian player (this is all energy stuff). There are several Eu banks and miscellaneous smaller Eu parties.
Not a single one would cross any line the US authorities choose to draw - not by an inch. Energy, see? It's international. Everyone will be travelling to the States one day. It's very effective self policing. CU has made this point before.
So good luck with your SPV, fellahs. But be it ever so technically sound - it ain't gonna work.