Bloomberg - European Union countries want to defy U.S. President Donald Trump and keep funds flowing to Iran to save the nuclear agreement -- just as long as it doesn�t happen in their backyard.

EU nations have identified Austria as the best candidate to host a special purpose vehicle that could handle payments to Iran, according to three people familiar with the negotiations. Austria itself is not so keen. Belgium, Luxembourg and France have also been identified as potential venues but Belgium and Luxembourg have declined while France is looking to Austria.

After discussing the idea with the rest of the government in Vienna, the foreign ministry decided that it �wouldn�t be feasible� for Austria to host the venture, a ministry spokeswoman said.

European governments are searching for ways to make good on their commitments to keep trading with Iran after Trump backed out of the nuclear deal in May. Fresh U.S. sanctions on oil and banking activities kicked in last week, posing a threat to companies that engage with Tehran. The Iranian government though is still observing the limits set on its nuclear activity under the deal, the International Atomic Energy Agency said Monday.

The SPV is a vital part of European attempts to salvage the accord, aiming to circumvent the U.S. sanctions regime and allow companies to continue doing business with Iran. Negotiations are proceeding slowly and no country is keen to host the SPV, which risks drawing ire from the U.S. administration. Where to set up the mechanism is just one of the sticking points.

�This looks nice on paper but it�s hard to do,� EU Commissioner Cecilia Malmstrom said on Wednesday. Two days earlier, Gordon Sondland, the U.S. ambassador to the EU, dismissed the idea as �a paper tiger.�

Euro-area central bankers are wary of the project and the potential consequences of falling foul of American sanctions.

The SPV would theoretically receive payments from countries that want to continue doing business with Iran, either by receiving waivers for oil imports or permissible trade in goods like food and medicine. With no direct transfer of funds between Iran and European actors, it would, theoretically at least, insulate firms from the U.S. punishment regime.

Bank Protection
Germany, France and the U.K. are among the countries pushing Austria to host the entity, according to one of the people. Of the other potential venues, Belgium is home to the international financial messaging service Swift, which has reluctantly cut Iran off in response to the American sanctions, while Luxembourg�s low-tax regime has made it a key offshore banking center.

An unresolved issue, according to one of the people, is how to reassure banks interacting with the SPV that they will be shielded from the risk of exclusion from the U.S. financial market. The idea is to start with very small volumes and eventually scale up operations, the person added.

Austria came to the conclusion that there are �many open questions for which there are no final answers at the moment,� foreign ministry spokesman Peter Guschelbauer was quoted as saying by the Austria Press Agency. Austria is still supporting the SPV in principle, �but it has to be designed so that it fulfills its purpose,� he said.

The push to domicile the vehicle in Austria comes at a delicate moment for Chancellor Sebastian Kurz�s foreign policy efforts. Kurz is governing in a coalition with the nationalist Freedom Party and is wooing Israel to stop ostracizing Freedom Party ministers. That effort wouldn�t be helped by a measure explicitly designed to facilitate trade with Iran, the sworn enemy of Prime Minister Benjamin Netanyahu, who is visiting Vienna next week.

� With assistance by Jonathan Tirone