Thursday 27 September 2018

EC Iranian Sanctions-Busting? Won't Work.

Now this is a headline to make anyone pay attention:
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 system
Federica 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.



Raedwald said...

Euros are particularly fearful of jail time in a US Federal jail. Unless they've got double-plated diplomatic immunity (and that's the capos next bent scam - selling EU diplomatic status - just wait and see) they won't try.

The only VW executive to be jailed for the emissions scandal is the North American VP; he knew what was coming and was trying to leave the US illegally via Florida when they picked him up. For the rest of the VW bosses, and Audi / porche / BMW, I suspect the US is off their holiday list. The septics have long arms and long memories.

CityUnslicker said...

Spot on ND.

Clever you maybe, but it is not unlike trying to escape Putin. They even do nasty executions in the US too and 400 jail terms for people just to be sure.

Good luck with your Iranian deals all!

Nothin new in this world said...

It's actually fairly simple. You sell the goods on a LoC and discount it.

Someone will buy.

You've been in the dark whereas we've been there, done it and have the T-shirt.

Electro-Kevin said...

As it should be.

The US provides the bulk of the West's defence.

dustybloke said...

Who would have thought the EU were such Steve Martin fans?

They reveal their true colours by naming their plan "Special Purpose". As revealed in Steve's film "The Jerk"...

Elby the Beserk said...

If one word and one word alone had to be used to describe both the conception and the behaviour of the EU, it has to be


Those of us blessed with a classical education will of course know that one thing and one thing only follows hubris, and that is NEMESIS...