Sputnik - European powers have partnered with Russia and China to create a new financial mechanism aimed at continuing trade with Iran, despite protests from the United States and its ongoing trade war with multiple world powers.



The vehicle is set to�bypass American sanctions and tariffs, as�well as�normalize trade between�the EU, Eurasia and China by�abandoning trade in�US dollars, potentially resetting the global economic order.


Sputnik spoke to�Pye�Ian, Los Angeles-based senior economics analyst, private equity executive�and commentator�at�Newsbud.com. Ian�possesses a background in�precious�metals commodity trading and strategic planning.


Sputnik: Is the European Union's Blocking Statue an effective mechanism for�averting financial sanctions?


Pye�Ian:�On the surface, the EU's "blocking statute" acts as�a counter-measure to�reimposed US sanctions on�Iran. American sanctions threaten European businesses with�legal actions based on�noncompliance and appear to�pose grave risks to�EU firms seeking access to�US markets and financial systems.


The EU blocking statute has drawn the ire of�Washington, who sees European allies as �disloyal' on�its foreign policy diktat and has provoked US officials to�force European firms to�choose between�working in�Iran or the US.


Yet the deeper issue is less between�betting on�Iran vs. the US, but�on a rising Eurasia bloc, including China, Russia, Turkey and an increasing number of�their allies and partners, all whom stand with�Iran and wish to�preserve the�three-year-old�Joint Comprehensive Plan of�Action (JCPoA), or Iran Nuclear Agreement. Iran has yet to�violate the agreement and wishes to�move away from�Washington's�unilateral�policies while�embracing global multipolar priorities in�trade, diplomacy and security independence.


Sputnik: What does the Special Purpose Vehicle (SPV) entail? How can European businesses circumvent US-imposed sanctions?


Pye�Ian:�The EU's three most important members-Germany, the United Kingdom, and France-set up�the Special Purpose Vehicle (SPV) as�a "clearing house" that will allow continued business and trade with�Iran. It is one of�several options that European countries are discussing with�the European Commission to�create independent payment channels for�conducting business and trade with�Iran.


The SPV ultimately represents an act of�defiance by�EU states against�Washington's unilateral decisions on�Iran, and the EU is holding fastidiously to�the�JCPoA�despite Washington pulling out�of the deal in�May this year. While Berlin, London, and Paris are driving the SPV, other EU member-states such as�Italy, which is keen on�participating, could join if the SPV is implemented.


The SPV represents a collaborative effort of�Iran's EU business partners to�circumvent US dollar dependency, where Iran could export oil to�Spanish, Greek or other EU firms to�accumulate Euros which Tehran could use to�pay for�goods and services exported from�the EU. This would not require US dollars and would meet US sanctions requirements for�not doing business with�Iran currency-wise while promoting crucial Iranian exports to�the EU such as�oil, for�which there are few replacements available.


This is evident in�the joint statement between�China, France, Russia, Germany, France, and Britain, which "welcomed practical proposals to�maintain and develop payment channels [�] to�facilitate payments related to�Iran's exports, including oil." The members intend to "protect the freedom of�their operators to�pursue business with�Iran," which asserts Europe's collective sovereignty and independence from�Washington.


Conversely, Tehran sought the SPV to�counter�reimposed sanctions triggered by�US president Donald Trump's withdrawal from�the Iran Deal and sees the SPV as�a means to�pull its EU and Eurasian partners closer in�a unique �blowback' move against�US economic warfare.


Sputnik: Just how difficult was it for�the EU to�develop the Special Purpose Vehicle? What does the SPV signal for�international markets?


Pye�Ian:�The EU previously struggled to�devise a workable legal framework to�shield its companies from�US sanctions, which are set to�come into�effect in�November, and has tried to�prevent firms from�pulling out�of Iran. As a result, the Iranian Rial�lost about�two-thirds of�its value this year, hitting a record low against�the USD this month.


EU High Representative for�Foreign Affairs and Security Policy Frederica Mogherini stated that the SPV "could be open to�other partners of�the world", which almost certainly includes China, Russia, Turkey, and India, whom Iran enjoys close relations and also are circumventing US sanctions in�other ways.�JCPoA�signatures Russia and China also ultimately seek protection via�the SPV.


Sputnik: What are some of�the �unintended consequences' of�US foreign policy regarding sanctions and tariffs? How could both Washington and global powers respond?


Pye�Ian:�The US nonetheless has the power to�expand anti-Iranian sanctions via�secondary sanctions against�firms participating in�the SPV scheme, but�doing so could backfire as�these would further alienate an already globally unpopular Trump administration, who chooses to�throw trade tariffs and sanctions against�multiple nations around�the world, be they friend or foe.


Doing so would beg the question over�viable stakes for�the US and its�Atlanticist�partners, who price oil and currency benchmarks in�US dollars to�maintain dollar hegemony in�order to�dominate others, and conversely, for�US debts and deficits to�continue growing without�any fiduciary checks and balances.


A key consideration on�how the SPV will function and evolve involves oil and natural gas pricing and trading. Iran, Russia, China and their Eurasian and southern hemispheric partners were already reducing dollar�dependence�for energy benchmarks and trading. One could argue that America's haste to�use trade tariffs and sanctions against�China, Russia, Iran, Venezuela and others was due to�Eurasian and Latin American momentum away from�the�45-year-old�petrodollar mechanism for�oil pricing, trading, and rent recycling.


Yet, in�a rushed effort to�stop this momentum, Washington could be expediting it. For example, the SPV could dovetail into�supporting the�petro-yuan,�petro-ruble, or a�gold-backed currency offerings�at global prices for�trading oil and gas, among�others. Such development could potentially harm the seemingly perennial confidence in�the already over-indebted fiat dollar.


Opposite this, the SPV's rushed development also evidences the increasingly Eurasia-leaning priorities of�an exasperated EU, which has an economy under�dire strain due to�systematic deflation and its �Club Med' southern nations with�economic difficulties due to�incurable debt burdens, austerity measures, and political instabilities.


If Washington cuts off�an already fairly isolated emerging economy like�Iran�the world�s 6th largest oil exporter and retains the second largest reserves of�natural gas�using opaque political reasoning, it doesn't bode well for�garnering cooperation with�the EU while also trying to�prevent a second global economic crisis due to�debt levels many times that in�2006-2008.


In fact, Washington's planned reduction of�Iranian oil exports to "zero" by�November 4 could veritably �tip things over' for�the petrodollar. Iranian oil exports cannot be extinguished with�any other crude supplies, considering that the Saudis have never proven their emergency output�capacity�to meet over�2 million barrels per day.


The Americans also cannot make up�supplies themselves, and any political �operation'�Atlanticists�may have planned to�take effect in�Iran after�November 4 had better happen fast and go �without a hitch' in�order to�prevent WTI and Brent from�surpassing $150 per barrel, thereby triggering aggressive recessions, popping debt bubbles, and ushering in�a formal dollar crisis.