European Allies Pushed Back When Trump Sanctioned Iran’s Banks

FRANKFURT/LONDON (Reuters) -
Iranian President Hassan Rouhani welcomes Iraqi Prime Minister Mustafa al-Kadhimi in Tehran in July. (Iraqi Prime Minister Media Office/Handout via Reuters)

Germany, France and Britain urged the Trump administration in late October to reconsider broad, new sanctions against Iran’s banks, arguing that the move would deter legitimate humanitarian trade and hurt the allies’ common interests, diplomatic correspondence shows.

Germany’s Bundesbank also kept a multi-billion-euro deposit facility open for Iranian banks, including two that faced fresh U.S. sanctions, giving Tehran a much-needed banking lifeline at a time its access to the global financial system was largely cut off, according to central bank data and interviews with bankers, Western diplomats and officials.

The behind-the-scenes pushback to Washington and the extent of Germany’s support to Iranian trade in the face of U.S. sanctions have not been previously reported, and shed new light on the divergent approaches to Iran taken by President Donald Trump and the U.S. allies.

The letter came after the United States imposed sanctions on October 8 against 18 Iranian banks as part of a campaign to exert “maximum pressure” on Tehran. The order barred Americans further from dealing with the Iranian banks and extended secondary sanctions on foreign companies that did business with those lenders. For foreign banks, violations could mean losing access to the U.S. market and raise the possibility of hefty penalties, even although U.S. sanctions, legally speaking, don’t apply in Europe and other jurisdictions.

In their joint letter, dated October 26, diplomats from the three European nations told Washington that the sanctions could make food and medicine “prohibitively expensive” for ordinary Iranians in the middle of the pandemic.

“The US has always said that its aim was to target the ruling elite and not the Iranian population,” according to the letter, a copy of which was seen by Reuters. “In our view it is important to uphold this undertaking in practice.”

They sought reassurances that the United States would “not impose penalties on financial institutions processing humanitarian trade in good faith without first engaging with them.”

In a statement to Reuters, the U.S. State Department said that Washington wants to ensure sanctions do not impede humanitarian assistance to respond to the COVID-19 pandemic.

A spokesperson with Britain’s Foreign, Commonwealth and Development Office said the UK “does not agree with these sanctions, which affect a number of banks helping the Iranian people access vital humanitarian supplies.”

France’s foreign ministry declined to comment. A French diplomatic source said the letter was part of ongoing efforts by the three countries to make clear to the U.S. administration that it would not give up on the Iran deal.

A German government official said that humanitarian channels need to remain open and that it has advocated for this.

A Bundesbank spokesman confirmed that Iranian banks held accounts with it in order to process payments but declined to comment on them individually. “The German Bundesbank is bound by national and European law, also, naturally, in relation to financial sanctions,” the spokesman said.

The Iranian government did not immediately respond to requests for comment.

One European diplomat said that Germany was now leading preparations to salvage the 2015 nuclear deal with Iran. The foreign ministers of Germany, France and Britain met in Berlin at the end of November to discuss Iran in a meeting France’s foreign ministry said was aimed at preserving the nuclear deal.

German lawmaker Klaus Ernst told Reuters that Berlin was keen that trade was revived.

“Europe needs to win its independence from America when making international payments,” said Ernst, who chairs the Bundestag’s economy and energy committee. “Trade is the best way of getting Iran to change for the better.”