The European Union launched formal steps on Friday aimed at sparing European firms fallout from US sanctions on Iran as part of efforts to preserve the nuclear deal with Tehran.
The move to invoke the "blocking statute" had received the all-clear at a meeting of European Union leaders in Sofia on Thursday as the transatlantic rift deepened, AFP reported.
The European Commission, the EU executive, said Friday it "launched the formal process to activate the blocking statute by updating the list of US sanctions on Iran falling within its scope."
US President Donald Trump last week controversially pulled Washington out of the 2015 international deal with Iran that placed limits on its nuclear program in return for lifting sanctions.
The "blocking statute," which EU member states and the European Parliament must still endorse, is aimed at easing the fears of European companies that invested in Iran after the deal.
"The blocking statute forbids EU companies from complying with the extraterritorial effects of US sanctions, allows companies to recover damages arising from such sanctions from the person causing them, and nullifies the effect in the EU of any foreign court judgments based on them," the commission said.
The commission said it hopes to have the measure in force before August 6 when the first batch of US sanctions take effect.
EU officials say they are revamping the blocking statute to protect EU companies against US Iran-related sanctions, after the expiry of 90- and 180-day wind-down periods that allow companies to quit the country and avoid fines.
EU investment support
The commission also launched "the formal process to remove obstacles for the European Investment Bank (EIB) to decide under the EU budget guarantee to finance activities outside the European Union, in Iran," the executive said.
"This will allow the EIB to support EU investment in Iran," it added, noting the measure could help small- and medium-sized companies.
Under that plan, the bank could guarantee such projects through the EU’s common budget, picking up part of the bill should they fail or collapse. The measure aims to encourage companies to invest.
The "blocking statute" is a 1996 regulation originally created to get around Washington's trade embargo on Cuba, which prohibits EU companies and courts from complying with specific foreign sanction laws, and says no foreign court judgments based on these laws have any effect in the European Union.
However, the Cuba row was settled politically, so the blocking regulation's effectiveness was never put to the test, and its value may lie more in becoming a bargaining chip with Washington.
Direct transfers to CBI
The European Commission is also proposing that EU governments make direct money transfers to Central Bank of Iran (CBI) to avoid US penalties, an EU official said, in what would be the most forthright challenge to Washington’s newly reimposed sanctions, Reuters reported.
The step, which would seek to bypass the US financial system, would allow European companies to repay Iran for oil exports and repatriate Iranian funds in Europe, a senior EU official said, although the details were still to be worked out.
“Commission President Jean-Claude Juncker has proposed this to member states. We now need to work out how we can facilitate oil payments and repatriate Iranian funds in the European Union to Iran’s Central Bank,” said the EU official, who is directly involved in the discussions.
The US Treasury announced on Tuesday more sanctions on officials of the CBI, including Governor Valiollah Seif. But the EU official said the bloc believes that does not sanction the bank itself.
European Energy Commissioner Miguel Arias Canete will discuss the idea with Iranian officials in Tehran during his trip this weekend, the EU official said. Then it will be up to EU governments to take a final decision.
Iran’s exports of mainly fuel and other energy products to the EU in 2016 jumped 344 percent to 5.5 billion euros (4.8 billion pounds) compared with the previous year.
EU investment in Iran, mainly from Germany, France and Italy, has jumped to more than 20 billion euros since 2016, in projects ranging from aerospace to energy.