Europe has yet to launch its special purpose vehicle (SPV) to support trade with Iran and while Iranian stakeholders grow increasingly impatient, some have begun to question the likely impact of the new mechanism. The chief complaint is that the initial SPV, if limited to humanitarian trade, will not have a meaningful economic impact for Iran, which had sought to maintain oil exports to Europe in the face of US sanctions.
As recently argued in a joint report from Bourse & Bazaar and the European Leadership Network, the creation of a humanitarian SPV (H-SPV) has important advantages from the standpoint of protecting the new trade mechanism from interference by the United States. A focus on non-sanctionable trade will enable Europe and Iran to develop a more robust mechanism that delivers practical value for businesses. When a truly useful mechanism has been devised, subsequent SPVs can be established to facilitate what the United States considers sanctionable trade.
Nonetheless, in order to be welcomed by a broad spectrum of Iran’s political and business establishment, the initial SPV, especially if limited to non-sanctionable trade, must demonstrate a positive impact on Iran’s economy in the near term. An examination of the nature of Europe-Iran trade and the impact of this trade on Iran’s currency markets, suggests that the SPV could have a significant and stabilizing impact on Iran’s economy by helping to fight runaway inflation, the foremost economic challenge facing Iran’s leadership.