{"id":748,"date":"2018-09-28T20:54:45","date_gmt":"2018-09-28T20:54:45","guid":{"rendered":"http:\/\/ielrblog.com\/?post_type=article&p=748"},"modified":"2018-09-28T20:54:45","modified_gmt":"2018-09-28T20:54:45","slug":"u-s-and-eu-collide-on-implementation-of-u-s-iran-sanctions","status":"publish","type":"article","link":"https:\/\/ielrblog.com\/index.php\/article\/u-s-and-eu-collide-on-implementation-of-u-s-iran-sanctions\/","title":{"rendered":"U.S. and EU Collide on Implementation of U.S. Iran Sanctions"},"content":{"rendered":"

As the United States Iran sanctions continue to unfold, the European Union and the U.S. are colliding on their implementation.\u00a0 In particular, on May 18, 2018 the European Commission started a formal process to update the 1996 EU Blocking Regulation (as referred to as the Blocking Statute) to include certain U.S. sanctions on Iran.\u00a0 The regulation entered into effect on August 7, 2018.\u00a0 On September 24, 2018, a joint statement of a ministerial meeting of the E3\/EU+2 (China, France, Germany, the Russian Federation and the United Kingdom, with the High Representative of the EU for Foreign Affairs and Security Policy) and the Islamic Republic of Iran) reconfirmed their commitment to its full and effective implementation of the Joint Comprehensive Plan of Action (JCPOA) and announced an initiative to establish a Special Purpose Vehicle (SPV) to facilitate payments related to Iran\u2019s exports (including oil) and imports, which will assist and reassure economic operators pursuing legitimate business with Iran.[1]<\/a>\u00a0 Meanwhile, on September 25, 2018, U.S. national security adviser John R. Bolton at a forum said \u201c(w)e do not intend to allow our sanctions to be evaded by Europe or anybody else.\u201d[2]<\/a><\/p>\n

On May 8, 2018, President Trump decided to withdraw the U.S. from the JCPOA and to reinstate all previously lifted sanctions under this agreement. The re-imposed U.S. sanctions will come into effect after a \u201cwind-down\u201d period of 90 days, which ended August 6, 2018 for certain sanctions and 180 days (ending November 4, 2018) for others.<\/p>\n

    \n
  1. The Updated Blocking Statute<\/em><\/li>\n<\/ol>\n

    The updated Blocking Statute is part of the EU’s support for the continued full and effective implementation of the JCPOA, including by sustaining trade and economic relations between the EU and Iran, which were normalized when nuclear-related sanctions were lifted as a result of the JCPOA.<\/p>\n

    The Blocking Statute permits EU operators to recover damages arising from U.S. extraterritorial sanctions from the persons causing them and nullifies the effect in the EU of any foreign court rulings based on them. It also prohibits EU persons from complying with those sanctions, unless the Commission exceptionally authorizes them to do so by in case non-compliance seriously damages their interests or the interests of the EU. The authorizations will be done on the basis of agreed criteria which will also be issued on August 7.[3]<\/a><\/p>\n

    To help EU companies implement the updated Blocking Statute, the Commission will also publish a Guidance note to facilitate understanding of the relevant legal acts.<\/p>\n

    The EU is fully committed to the continued, full and effective implementation of the JCPOA, as long as Iran also respects its nuclear-related commitments. The lifting of nuclear-related sanctions permitting the normalization of trade and economic relations with Iran constitute essential parts of the JCPOA.\u00a0\u00a0 Simultaneously, the EU is also committed to maintaining cooperation with the U.S., who remains a key partner and ally.<\/p>\n

    The EU, in close coordination with Member States and other partners, is working on concrete measures aimed at sustaining the cooperation with Iran in key economic sectors, particularly on banking and finance, trade and investment, oil, and transport.[4]<\/a><\/p>\n

      \n
    1. Joint Ministerial Statement<\/em><\/li>\n<\/ol>\n

      During the September 24, 2018 meeting, the JCPOA participants reconfirmed their commitment to its full and effective implementation in good faith and in a constructive atmosphere.\u00a0 They recalled that the JCPOA is a key element of the global non-proliferation architecture and a significant achievement of multilateral diplomacy endorsed unanimously by the UN Security Council through Resolution 2231.<\/p>\n

      The participants recognized that Iran has continued to fully and effectively implement its nuclear-related commitments, as confirmed by twelve consecutive reports by the International Atomic Energy Agency, and reiterated the need to continue to do so.<\/p>\n

      The participants observed that, alongside implementation by Iran of its nuclear-related commitments, the lifting of sanctions, including the economic benefits arising from it, constitutes an essential part of the JCPOA.[5]<\/a><\/p>\n

      While it is not clear how the EU\u2019s alternative payment system would work, one of the likeliest options involves a credits system that would permit persons with Iran connections to trade goods without transferring real money.\u00a0 Such a system would make it well-nigh difficult, if not impossible for U.S. authorities to track trade between European and Iran entities and minimize the risk of sanctions.[6]<\/a><\/p>\n

        \n
      1. Analysis<\/em><\/li>\n<\/ol>\n

        At the same forum at which Bolton spoke, Secretary of State Mike Pompeo said the Trump administration was \u201cdisturbed and deeply disappointed\u201d by plans by the JCPOA participants to create an SPV to be protected from U.S. sanctions.\u00a0 According to Pompeo, the creation of an SPV would be \u201cone of the most counterproductive measures imaginable for regional and global peace and security.\u201d [7]<\/a><\/p>\n

        One battle will be over the Trump administration\u2019s effort to have the Society for Worldwide Interbank Financial Telecommunication (SWIFT) to remove Iran\u2019s bank, including its central bank, from the system.\u00a0\u00a0 The EU has responded removing Iran undermine the global financial system and make it more vulnerable to cyberattacks and alternative messaging services created by China and Russia.[8]<\/a><\/p>\n

        Many businesses will be caught between the Iran sanctions and EU blocking regulation.\u00a0 Already many large European businesses, including Total and Volkswagen, are already pulling out of Iran due to the continuing U.S. sanctions.[9]<\/a><\/p>\n

        Trade associations have expressed concern over the conflicting regimes.\u00a0 For instance, UK Finance has observed Article 6 of the Blocking Regulation further exposes the EU financial sector to the possibility of private claims for damages.\u00a0 For instance, any person who suffers losses because of the EU person\u2019s compliance with U.S. sanctions in breach of the Regulation is entitled to claim damages against the EU person.[10]<\/a>\u00a0\u00a0 The paper states that the assessment is that in comparison to pre-JCPOA days the risk of civil litigation under the updated Blocking Regulation has significantly increased.[11]<\/a><\/p>\n

        A major potential issue is whether, in the long run, the establishment of an SPV may undermine U.S. dominance of the international payment systems, on which the ability of the U.S. to successfully impose unilateral sanctions depends.[12]<\/a>\u00a0 Ultimately the U.S. ability to successfully employ sanctions depends on the active use of America\u2019s strategic suasion, which is the directed use of U.S. power and influence to align influential state and nonstate actors and networks with U.S. interests.[13]<\/a>\u00a0 Successful U.S. sanctions against large countries have required multilateral support.\u00a0 The continued implementation of U.S. unilateral sanctions against Iran without the support of U.S. allies, and especially with their active resistance, risks jeopardizing the success of the Iran sanctions and the long-term stability of the United States.<\/p>\n

        [1]<\/a>\u00a0\u00a0\u00a0 Implementation of the Joint Comprehensive Plan of Action: Joint Ministerial Statement, Sept. 24, 2018\u00a0 https:\/\/eeas.europa.eu\/headquarters\/headquarters-homepage\/51036\/implementation-joint-comprehensive-plan-action-joint-ministerial-statement<\/a><\/p>\n

        [2]<\/a>\u00a0\u00a0\u00a0 Gardiner Harris, Bolton Warns of \u2018Terrible Consequences\u2019 if Nations\u00a0 Defy Iran Sanctions<\/em>, N.Y. Times, Sept. 26, 2018, at A10, col. 1.<\/p>\n

        [3]<\/a>\u00a0\u00a0\u00a0 Commission Implementing Regulation (EU) 2018\/1101 of 3 August 2018 laying down the criteria for the application of the second paragraph of Article 5 of Council Regulation (EC) No 2271\/96 protecting against the effects of the extra-territorial application of legislation adopted by a third country, and actions based thereon or resulting therefrom C\/2018\/5247 https:\/\/eur-lex.europa.eu\/legal-content\/EN\/TXT\/?uri=uriserv:OJ.LI.2018.199.01.0007.01.ENG&toc=OJ:L:2018:199I:TOC<\/a>.<\/p>\n

        [4]<\/a>\u00a0\u00a0\u00a0 European Commission, Updated Blocking Statute in support of Iran nuclear deal enters into force, Brussels, Press release, August 6, 2018 http:\/\/europa.eu\/rapid\/press-release_IP-18-4805_en.htm<\/a><\/p>\n

        [5]<\/a>\u00a0\u00a0\u00a0 Implementation of the Joint Comprehensive Plan of Action: Joint Ministerial Statement, supra.<\/em><\/p>\n

        [6]<\/a>\u00a0\u00a0 Rick Noack, A subtle sign of diminishing U.S. influence \u2013 besides leaders laughing at Trump<\/em>, Wash. Post, Sept. 27, 2018, at A15, col. 1.<\/p>\n

        [7]<\/a>\u00a0\u00a0 Gardiner Harris, Bolton Warns of \u2018Terrible Consequences\u2019 if Nations Defy Iran Sanctions<\/em>, N.Y. Times, Sept. 26, 2018, at A10, col. 1.<\/a><\/p>\n

        [8]\u00a0\u00a0 Id.<\/em><\/p>\n

        [9]<\/a>\u00a0\u00a0 Id<\/em>.<\/a><\/p>\n

        [10]\u00a0 UK Finance, The EU Blocking Regulation \u2013 Issues and Considerations for the Financial Services Section, at 2 (July 11, 2018) https:\/\/www.ukfinance.org.uk\/wp-content\/uploads\/2018\/07\/UK-Finance-paper-EU-Blocking-Regulation-11-July-2018-FINAL.pdf<\/a>.<\/p>\n

        [11]<\/a>\u00a0\u00a0 Id<\/em>. at 4.<\/a><\/p>\n

        [12]\u00a0\u00a0 Noack, supra.<\/em><\/p>\n

        [13]<\/a>\u00a0\u00a0\u00a0 Juan C. Zarate, Treasury\u2019s War:\u00a0 The Unleashing of a New Era of Financial Warfare 431 (2013).<\/p>\n","protected":false},"excerpt":{"rendered":"

        As the United States Iran sanctions continue to unfold, the European Union and the U.S. are colliding on their implementation.\u00a0 In particular, on May 18, 2018 the European Commission started a formal process to update the 1996 EU Blocking Regulation (as referred to as the Blocking Statute) to include certain U.S. sanctions on Iran.\u00a0 The […]<\/p>\n","protected":false},"author":1,"featured_media":0,"menu_order":0,"comment_status":"open","ping_status":"open","template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","jetpack_post_was_ever_published":false,"footnotes":""},"categories":[],"tags":[],"issuem_issue":[58],"class_list":{"0":"post-748","1":"article","2":"type-article","3":"status-publish","4":"format-standard","6":"issuem_issue-volume-34-issue-10","7":"entry"},"yoast_head":"\nU.S. and EU Collide on Implementation of U.S. Iran Sanctions | IELR Blog<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ielrblog.com\/index.php\/article\/u-s-and-eu-collide-on-implementation-of-u-s-iran-sanctions\/\" 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