Austria has rejected hosting the EU’s proposed special purpose vehicle (SPV) designed to enable European companies to keep trading with Iran despite the ultra-tough US sanctions regime targeted at the country and almost anyone who does business with it, Austria Press Agency (APA) reported on November 14.

Brussels is faced with a ‘Not in my backyard’ dilemma over the SPV mechanism. While member states of the European bloc generally back the idea, nobody has stepped forward with an offer to domicile it, presumably out of fear that they would be exposed to US retaliation. Austria is one of the few European countries to have maintained warm relations with Iran on several levels—the Austrian Cultural Centre in Tehran has remained open despite years of anti-Western sentiment from hardliners—and it was thought that Vienna—currently holding the EU’s rotating presidency—might be open to the idea of providing a home for the SPV.

"We were asked if Austria would be prepared in principle to host this special purpose vehicle," Austrian foreign ministry spokesman Peter Guschelbauer reportedly said on November 13. He added that after studying the proposal “very closely”, the Austrian government “came to the conclusion that at the moment we are not in a position to host this vehicle”.

"There are lots of unanswered technical questions" about the "effectiveness of this setup", Guschelbauer was also quoted as saying, adding that Austria was still supporting the SPV in principle “but it has to be designed so that it fulfills its purpose”.

Belgium and Luxembourg are among countries known to have in recent days quietly turned down the possibility of hosting the SPV.

Toughest sanctions ever
The White House has introduced the toughest set of sanctions ever directed at Iran in its bid to relentlessly strangle the Iranian economy and cause Tehran to surrender to its demands for big changes in how the Islamic Republic approaches Middle East affairs. It was angered when the EU announced it would help Iran fight the economic attack from the US with the mechanism to protect continuing trade from sanctions, but Trump administration officials have lately been scoffing at the idea that the SPV could deliver anything significant.

In response to the proposed SPV, White House National Security Advisor and Iran uber-hawk John Bolton said the clearinghouse would be very difficult to implement given the extent of the sanctions in place.

"We think the [Iranian] government is under real pressure and it's our intention to squeeze them very hard," Bolton told media in Singapore on November 13.

He added: "As the British say, squeeze them until the pips squeak."

“This [SPV] looks nice on paper but it’s hard to do,” EU Commissioner for Trade Cecilia Malmstrom said on November 13. Two days earlier, Gordon Sondland, the US ambassador to the EU, wrote off the idea as “a paper tiger.”

Opaque structure
EU officials say the SPV would receive payments from countries that want to continue doing business with Iran. Barter arrangements would be used and, with no direct transfer of funds between Iran and European actors and an opaque structure protecting the identities of parties using the mechanism, companies and banks could be shielded from US punishment.

The US announced it was returning to its Iran sanctions policy after pulling out of the Iran nuclear deal in early May. The Iranians and the other major power signatories—the UK, France, Germany, Russia and China—remain in the accord. It is framed to protect Iran from crippling sanctions in return for compliance with measures designed to prevent the country from moving towards the development of a nuclear weapon.

On November 12, the UN’s atomic watchdog said Iran was still fulfilling its nuclear deal obligations.

Centrist, pragmatic Iranian President Hassan Rouhani signed the nuclear agreement on behalf of Iran in late 2015 against the protests of hardliners who said that the US could not be trusted to meet its commitments. The fear is that if Europe fails to substantially deliver on its pledges to assist Iran economically in the face of the US hostility, the pressure from the hardliners for Iran to withdraw from the deal could become irresistible.

Iran has been pleased by the psychological boost the EU has given it by standing with it in opposition to the US sanctions regime, but if viable economic help is not forthcoming in the near future calls for an Iranian pullout from the accord will only become louder.