The Special Purpose Vehicle and the future of the Iran deal

The Special Purpose Vehicle and the future of the Iran deal

In yet another sign of the US’ waning global leadership role on the Iran nuclear deal, the EU, Russia and China have set up an alternate payment mechanism called the Special Purpose Vehicle or SPV as a means to bypass any additional US sanctions. The move is an important step in upholding the Iran nuclear deal by the remaining signatories, an agreement that President Trump, his national security advisor John Bolton, and Secretary of State Mike Pompeo strongly oppose.

State of the Iran deal

Whether the SPV will be the means by which the nuclear agreement is saved is still uncertain, but it shows a willingness by the other parties to stick to the agreement and favor multilateral institutions and reporting mechanisms over the sovereignty and nationalism espoused by President Trump. The nuclear deal will continue to lack its full legitimacy and weight without US approval, and there is only so much diplomatic maneuvering that the EU and Russia can do without the US getting involved in key decisions.

What is clearly unlikely, however, is a new Iran deal or any rewriting of the existing accord. Iran is committed to the deal as are the other powers who are keen to open up new lines of business with the republic and tap into Iran’s booming population. Iran is not seen as a pariah state by the other signatories in the way in which it is viewed in Washington, and that is bound to cause some disruptions in the period ahead. Secretary of State Mike Pompeo has called the SPV “deeply counterproductive”, although from the perspective of the EU, Russia, Iran and China, the US withdrawal from the accord is arguably the most damaging and counterproductive measure of all.

Pathways forward for all parties involved

The perception of the Iran nuclear deal in the current White House is unlikely to change so long as Bolton and Pompeo are advising President Trump. Even in Republican circles, the deal remains very unpopular and the US-Israeli relationship and Prime Minister Netanyahu’s opposition to the deal is a very influential position to consider in Washington. Netanyahu and Trump have a very close relationship, and Trump is likely to take Netanyahu’s recent claim at the UN General Assembly that there is a secret Iranian nuclear site seriously.

For the EU, Russia and China, the accord is a way to showcase their diplomatic clout and respect for international institutions and multilateral agreements. They can say that President Trump, not Iran, is violating the spirit of the deal, but what is arguably more difficult is to sustain a mechanism like the SPV so long as US sanctions remain a risk. EU foreign policy chief Federica Mogherini says the SPV could be in place before November, which is unlikely given the number of parties involved and the complex nature of setting up a barter system outside of US influence. However, the timeline may also suggest that the EU and other parties have been considering such an arrangement for some time knowing the Trump administration’s position on the nuclear deal. Either way, it is a risky move that is bound to further alienate the US while bolstering the position of the EU and other powers on this sensitive issue.

It is clear after the UN General Assembly meetings that Iran does not trust the Trump administration and vice versa, but there is some degree of trust between Mogherini and President Rouhani as well as Javad Zarif, Iran’s foreign minister. If they are able to craft an effective architecture for trade and business links without the US then that would be a remarkable achievement for the EU and perhaps the greatest example of other powers working together on a critical international security issue absent Washington. In the long-term, however, the SPV is not sustainable, as President Trump will not be in office forever and the general view in Washington on foreign policy matters is to work together with allies and not renege on existing deals. Trump’s worldview and that of his advisors is the exception and not the norm, and the other signatories of the Iran deal will have to decide whether the US under a new administration can join the SPV in the future.

The SPV may prove to be a dangerous precedent, or it may be the boldest move yet in a post-American world that sees China, the EU and others assume greater leadership roles. Either way, it is a commitment to the rules-based order that the US helped establish, and it is hard not to conclude that Iran, Russia, China and the EU are taking the more responsible position when it comes to maintaining a strategic relationship with Iran.

About Author

Alexander Brotman

Alexander Brotman received an MSc in International Relations from The University of Edinburgh. He previously was a researcher with the Center for a New American Security in Washington and has been published with PassBlue, a digital publication covering the UN, as well as Cable, an online global affairs magazine published by the Scottish Global Forum. His research interests include European politics, NATO and Russian foreign and security policy.