LobeLog | Esfandyar Batmanghelidj: In an�op-ed published last week�in the German newspaper�Handelsblatt, German Foreign Minister Heiko Maas declared that the �the US and Europe have been drifting apart for years.� Nowhere is this clearer than in the disagreement between the United States and Europe over the fate of the Iran nuclear deal. When President Trump withdrew from the Joint Comprehensive Plan of Action (JCPOA) and announced his intention to reimpose secondary sanctions that would impact European businesses, he made clear that he wouldn�t treat Europe in what Maas called a �balanced partnership.� In response, Maas believes that Europe must �bring more weight to bear� in global affairs.

In order to defend the JCPOA and protect European companies active in Iran from U.S. sanctions, Maas outlined three initiatives: �establishing payment channels independent of the US, a European monetary fund, and an independent SWIFT [payments] system.� These initiatives�echo ideas expressed�by French economy minister Bruno Le Maire in the aftermath of Trump�s withdrawal from the JCPOA. Le Maire has called for European governments to work together to protect Europe�s economic autonomy by creating �independent, sovereign European financial institutions which would allow financing channels between French, Italian, German, Spanish and any other countries on the planet.� Le Maire has declared that �the United States should not be the planet�s economic policeman.�

It will be difficult to realize the political designs of Maas and Le Maire within the economic structures that link Europe and global markets, including Iran. As Maas concedes, �the devil is in thousands of details.� It should be no surprise, therefore, that speaking to President Hassan Rouhani�s cabinet�earlier this week, Supreme Leader Ali Khamenei declared that Iran �must not pin hope on the Europeans for issues such as the JCPOA or the economy,� noting that promises must be examined with �skepticism.�

Iran should not take for granted the hopeful vision of more resolute European leadership, especially if that leadership promises to deliver fairer political and economic outcomes for Iran. But in light of the present economic crisis, the Iranian government and Iranian people can no longer afford to take a long-term view when it comes to fundamental questions like access to the international financial system, whether or not that system continues to be dominated by the United States. As such, it is important to try and discern the specific and short-term implications of the new political vision espoused by leaders like Maas and Le Maire.

First, there has been the greatest progress in designing possible payment channels that would help sustain transactions in the face of U.S. secondary sanctions. As an initial step, the central banks of France, Germany, the United Kingdom, Austria, and Sweden have�indicated their openness�to establishing payment channels with the Central Bank of Iran that would be immune to sanctions since the U.S. government is unlikely to take the extreme step of sanctioning European central banks for transacting with Iranian entities. Importantly, these central banks, which would be facilitating transactions on an�ad hocbasis, would not need to rely on payment systems such as SWIFT.

However, the central banks have established a pre-condition: Iran must fully implement the Financial Action Task Force (FATF) action plan. But even if Iran does successful implement the FATF reforms, and even if European central banks fulfill their promise, the creation of limited payment channels does not amount to an independent financial system. In such a scenario, the impact of U.S. sanctions on European and Iranian banks will continue to prevent trade and investment in meaningful volumes.

Second, the creation of an independent payment messaging system is essential to enabling those smaller European banks that lack a �U.S nexus� to transact with Iranian banks, thereby enabling trade and investment at higher volumes. To this end, Maas has called for the creation of �an independent SWIFT [payments] system.� Notably, Maas� statement makes it clear that European leaders do not expect to successfully defend the independence of SWIFT in its current form. SWIFT, headquartered near Brussels, is a cooperative owned by its member financial institutions, including major American banks such as Citibank and JP Morgan. Even so, SWIFT represents a rare global financial institution in which the United States is not dominant,�but dependent. Some analysts, among them�former officials�from the U.S. Department of Treasury, have observed that it would be harmful to U.S. economic interests to sanction SWIFT. In fact, when SWIFT disconnected Iranian banks from its system in 2012, this was only because the organization voluntarily agreed to do so in accordance with�European sanctions policy�at the time, not because of the realistic threat that the U.S. would sanction the entity.

It is not entirely clear whether Maas wants Europe to insist on SWIFT�s independence or to devise new messaging systems altogether. A new system would be technically easy to establish but would prove difficult to monitor for possible money laundering or terrorist financing, an important political consideration. Although the former approach would certainly deliver Iran a more immediate solution on banking challenges stemming from U.S. sanctions, given that Iranian banks were reconnected to the SWIFT following implementation of the nuclear deal, Europe will more likely take the latter, more time-intensive approach. German Chancellor Angela Merkel�responded to Maas��op-ed (which she called an �important contribution�) by noting that �on the question of independent payment systems, we have some problems in our dealings with Iran�on the other hand we know that on questions of terrorist financing, for example, SWIFT is very important.� Merkel�s comments suggest that political capital will most likely be spent creating a minimal,�ad hoc�messaging system in support of transactions with Iran rather than defending the independence of SWIFT in the face of a U.S. sanctions threat.

Finally, if payment channel and payment messaging solutions can be devised, Europe will need to ensure financing flows through these channels to Iran, in order to spur economic growth and support infrastructure and energy projects led by European companies. Here, Maas has pointed to the creation of a European Monetary Fund. Plans for the creation of such a fund have been circulating in European capitals�for over a year�and are based on upgrading the European Stability Mechanism (ESM), the entity that managed the bailouts of Eurozone states made necessary by the global financial crisis. Currently, ESM borrows on capital markets by issuing bonds. Such a reliance on capital markets has proven the critical barrier to the European Commission�s effort to get the European Investment Bank (EIB), which finances capital projects around the world, to invest in Iran. Like ESM, EIB raises capital by selling bonds, often to American institutional investors. Understandably, the CEO of EIB has�publically rejected�calls to invest in Iran, stating that to do so �would risk the business model of the bank.�

The creation of a European Monetary Fund would be supported by financing drawn directly from European central banks and not capital markets, limiting exposure to U.S. investors, and therefore to the risk of U.S. sanctions. Such an institution would also reduce European reliance on the International Monetary Fund and World Bank, which remain politically dominated by the United States. Whereas countries such as Turkey and Egypt have readily used IMF financing to fuel growth and weather economic crisis, longstanding tensions between the United States and the Islamic Republic mean that Iran has been unable to secure IMF loans.

European governments are aware of the need to support Iran�s economic development through capital allocation. The European Commission�s�recent move�to allocate to Iran 18 million euros of a planned 50 million euros of development aid in order to �widen economic and sectoral relations� demonstrates the desire to fund growth. The European Commission simply lacks the right financial institutions to provide such capital to Iran at a meaningful scale.

Overall, Maas� message contains real, practical ideas about how to not only sustain trade and investment in Iran in the face of secondary sanctions but also strengthen Europe�s economic sovereignty in lasting ways. However, Iran must recognize that there is no readymade �economic package� that Europe can deliver to save the JCPOA. There is only an �economic process� where improvements in the facilitation of trade and investment will occur over time and in sequence.

In the coming months, it will be feasible to institute a payment channel between central banks. In the coming year, it will be feasible to establish a new payment messaging system. Finally, over the course of several years, Iran could benefit from the creation of a European Monetary Fund, financing from which could truly transform prospects for Iran�s economy. For its part, Iran must remain willing to undertake its own economic process, beginning with�critical FATF reforms. In this way, if Europe and Iran each grow stronger, through a renewed insistence on independence and autonomy, the prospects for political and economic cooperation will actually improve. The United States cannot be the fulcrum on which all partnerships must balance.

A Persian language version of this article first appeared in Hamshahri.�