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EU, Russia, and China Unveil New System to Bypass US Sanctions on Iran

Almighty dollar? Not so much

On Monday, European Union foreign policy director Federica Mogherini revealed that a plan to ensure trade with Iran can continue despite US threats. This plan had been discussed by the EU before, but now is also including China and Russia, the other powers in the Iran nuclear deal.

The deal will see the European Union formally establishing a clearing house that will act as a legal entity specifically to handle all Iran trade among all the companies in the nations involved. This will allow everyone to circumvent banks when trading with Iran.

The clearing house model means, for instance, that one company could import Iranian oil and gas, while a second company could be hired by Iran for infrastructure improvements. Instead of any money changing hands with Iran, one company would pay what they owe Iran to the clearing house, which would pay the other companies which Iran owes money to.

A comparable model would presumably have to be established in Iran to deal with different companies and government agencies within Iran exporting and importing goods. Since these are almost all state-owned companies, this likely will be simpler on the Iranian side.

EU foreign policy chief Federica Mogherini alongside Iranian Foreign Minister Mohammad Javad Zarif

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Though the European Union had already passed laws pledging to protect all private companies trading with Iran, a number of EU banks have refused to facilitate any of this trade, because the US is threatening to cut such banks off from the US market.

The inability to get banks on board was meaning a lot of European companies are backing away from deals, fearing they’d never be able to get paid. This new plan is meant to address that concern, but it remains to be seen if this will lead to a quick turnaround for European companies heading back into Iran. China and Russia joining will likely give this clearing house more credibility, as neither of those nations ever really stopped trading with Iran.

Meanwhile, as Bershidsky concludes, "Trump’s confidence in his ability to weaponize the dollar against adversaries and stubborn allies alike could eventually backfire for the U.S. as efforts to push the dollar off its pedestal grow ever more serious."

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