Oil in Global Economy Series: EU’s sanction bypass mechanism to become operational by next year

At the sidelines of last month’s United Nations General Assembly (UNGA) after meeting with Iran nuclear agreement (JCPoA) counterparts (Iran, China, Russia), the EU along with United Kingdom announced a reached agreement to create a special purpose vehicle (SPV) to protect Iran’s oil exports from the U.S. sanctions, first round of which, went into effect in August targeting Iran’s access to USD and the rest to go live by November 4th, especially targeting Iran’s oil exports and banking system.

Though the SPV is built to protect European companies trading with Iran, officials have confirmed that third-party countries would also be able to use it after the initial launch.

However, the European officials have confirmed that while the mechanism would legally be ready before November 4th deadline, it will not be operational. It would take months to make it fully operational. So, a more practical timeline is early next year, possibly by the first quarter. The diplomats have also confirmed that the mechanism would not be enough to preserve all trade but sends a strong signal of intention to preserve the deal from the European side, in the face of U.S. sanctions.