…As EU, China and Russia in move to sidestep US sanctions on Iran***
US National Security Adviser John Bolton has warned Iran’s rulers that there will be “hell to pay” if they harm the US, its citizens or allies.
His comments came hours after President Donald Trump accused Iran of sowing “chaos, death and destruction” across the Middle East.
Iranian President Hassan Rouhani responded by criticising the Trump administration for its hostility.
The US recently imposed sanctions after leaving the 2015 Iran nuclear deal.
The accord, negotiated by former President Barack Obama, saw Iran limit its nuclear activities in exchange for sanctions relief.
The remaining signatories are standing by the deal. The UK, China, France, Germany and Russia say they will set up a new payment system to maintain business with Iran and bypass US sanctions.
US Secretary of State Mike Pompeo condemned the plan as “one of the most counterproductive measures imaginable”.
What did the US say about Iran?
Mr Bolton said the “murderous regime” of “mullahs in Tehran” would face significant consequences if they continued to “lie, cheat and deceive”.
The former US envoy to the UN was speaking at an anti-Iran conference in New York on Tuesday.
“If you cross us, our allies, or our partners; if you harm our citizens,” he said, “there will indeed be hell to pay.”
“Let my message today be clear: We are watching, and we will come after you.”
Mr Bolton, who has argued for military action against Iran in the past, said the US would be aggressive in enforcing economic sanctions.
Meanwhile, President Trump defended his decision to abandon the nuclear deal while speaking at the UN General Assembly in New York.
“Iran’s leaders sow chaos, death and destruction,” he said.
“They do not respect their neighbours or borders or the sovereign rights of nations. Instead, Iran’s leaders plunder the nation’s resources to enrich themselves and spread mayhem across the Middle East and far beyond.”
He believes renewed economic pressure will force Iran to agree to a new deal.
On Wednesday, Mr Trump is due to lead a UN Security Council meeting on Iran and the non-proliferation of nuclear weapons.
How did Iran respond?
Mr Rouhani said dialogue should begin by ending threats and what he called “unjust sanctions”, adding that no nation could be brought to the negotiating table by force.
“The United States’ understanding of international relations is authoritarian. In its estimation might makes right. Its understanding of power, not of legal and legitimate authority, is reflected in bullying and imposition,” he said in New York.
Iran has accused Mr Trump of waging “psychological warfare” against it and denies any involvement in terrorism. It insists its nuclear programme is entirely peaceful.
In August, the US reinstated sanctions targeting the Iranian government’s purchase of US dollars, Iran’s trade in gold and other precious metals, and its automotive sector.
The value of Iran’s currency, the rial, has been damaged by the new US policy.
In November, a second batch of potentially more damaging sanctions will be re-imposed on Iran’s oil and shipping sectors as well as its central bank.
In the meantime, the European Union, Iran, China and Russia have set out a plan to sidestep unilateral US sanctions designed to cripple the Iranian economy and force the Iranians to renegotiate the nuclear deal signed in 2015.
European diplomats hope the proposed measure – known as a special purpose vehicle (SPV) – will help persuade an increasingly reluctant Iran to stay inside the deal in the hope of rescuing its economy.
Speaking on the sidelines of the UN general assembly in New York, Federica Mogerhini, the EU external affairs chief, said the SPV was designed to facilitate payments related to Iran’s exports – including oil – and imports, so long as the firms involved were carrying out legitimate business under EU law.
The aim is to make the SPV available not just to EU firms but to others, she added.
In his address to the United Nations general assembly, Iran’s president, Hassan Rouhani, stressed Tehran’s continued commitment to the deal and accused the US of pressurising other countries into violating the nuclear agreement.
“Confronting multilateralism is not a sign of strength,” he said. “Rather, it is a symptom of the weakness of intellect. It betrays an inability in understanding a complex and interconnected world.”
But the US president Donald Trump’s secretary of state, Mike Pompeo, addressing an anti-Iran pressure group, said he was “disturbed and indeed deeply disappointed” by the EU plan.
“This is one of the of the most counterproductive measures imaginable for regional and global peace and security,” Pompeo said.
Versions of the SPV floated by thinktanks suggest it could underpin a sophisticated barter system that can avoid US Treasury sanctions. For example, Iran could ship crude oil to a French firm, accumulating credit that could then be used to pay an Italian manufacturer for goods shipped the other way, without any funds traversing through Iranian hands or the banking system.
A multinational European state-backed financial intermediary would be set up to handle deals with companies interested in Iran transactions and with Iranian counter-parties. Any transactions would not be transparent to the US, and involve euros and sterling rather than dollars.
The proposal is additional to a blocking statute passed by the EU in August that theoretically makes EU companies immune from sanctions imposed by the US in pursuit of its Iran policy. In theory, the statute empowers EU firms to seek compensation from US Treasury for trying to impose extra-territorial sanctions in breach of the statute. So far this statute has not been tested in court.
Richard Nephew, a former Barack Obama official and author of The Art of Sanctions, expressed scepticism on Twitter, saying that for the SPV to be taken up, European firms – many with either US employees, or US subsidiaries – must still be prepared to take the risk of being sanctioned by the US.
He also suggested US sanctions could be applied to the traded good as much as to the cash to fund the trade. He predicted few firms would take that risk, outside some SMEs [small and medium-sized enterprises] heavily dependent on Iran for their income.
Jarrett Blanc, another former Obama staffer for the Iran deal, broadly agreed with Nephew, but was more sympathetic, writing that “the symbolism here is probably Europe’s most important contribution, and it may be sufficient depending on what China, India, Turkey do on oil”. He added: “The payment mechanism move opens the door to a longer-term degradation of US sanctions power.”
Either way, Europe needs a solution soon after months of railing against US economic imperialism. The vast majority of European firms are planning to pull out.
Trump announced two sets of US secondary sanctions in May, and other sanctions imposed in August cover shipping and insurance. The other more important sanctions – aimed at ending Iranian oil exports, still the heart of the faltering Iranian economy – do not bite until 5 November.
In advance of the oil sanctions, Iran’s crude sales to China fell 21% between May and August, according to Eurasia Group. But it is unclear how long China will stick to that trend.
The assumption is that many countries like India and Russia will continue to trade with Iran and challenge the US to try to impose sanctions, pointing out that in reality it is the US, by tearing up the agreement and not them, that is in breach of UN resolutions.
BBC with additional report from Guardian UK