The United States has sharply criticized a European Union plan to help Iran get around U.S. sanctions by establishing alternative ways to pay for Iran's trade with European companies.
U.S. Secretary of State Mike Pompeo, speaking at a New York conference on September 25, said that he was "disturbed and indeed deeply disappointed" when he heard of the plan announced a day earlier after a high-level meeting between European and Iranian diplomats.
"This is one of the most counterproductive measures imaginable for regional and international peace and security," Pompeo told the United Against a Nuclear Iran group, accusing the EU of "solidifying Iran's ranking as the number one state sponsor of terror."
Pompeo said he imagined Iran's "corrupt ayatollahs" were "laughing" when they heard news of the proposed payment system, the details of which European leaders said are still being hammered out.
The plan carries out promises by European powers to keep honoring Iran's 2015 nuclear deal with world powers after the U.S. announced in May that is was withdrawing from the accord and would reimpose sanctions on Tehran.
It represents the latest effort by the EU, France, Germany, and Britain to work with Iran, Russia, and China to keep carrying out the agreement, which granted Iran relief from economic sanctions in exchange for curbs on its nuclear activities, without the United States.
U.S. National Security Adviser John Bolton, speaking in the same forum as Pompeo, mocked the EU for the plan's lack of specifics.
"The European Union is strong on rhetoric and weak on follow-through," he said. "We will be watching the development of this structure that doesn't exist yet and has no target date to be created. We do not intend to allow our sanctions to be evaded by Europe or anybody else."
Bolton said the United States will be "aggressive and unwavering" in enforcing its sanctions, which are due to go fully into effect on November 4. He said Washington still expects Iran's oil customers to slash imports to zero by that deadline.
Pompeo questioned why nations would continue to trade with what he called an "outlaw regime," which he said supports militant groups in the Middle East and sponsors attacks against Israeli targets around the world.
"There can be no question Iranian destructive activities are truly global in scope. It is therefore incumbent on every country to join our efforts to change the regime's lawless behavior," he said. "The ongoing, multinational, multi-continental nature of Iranian malign activity leaves no room for inaction or indecision."
EU foreign policy chief Federica Mogherini, speaking late on September 24 alongside Iranian Foreign Minister Mohammad Javad Zarif, said that the sanctions evasion plan was in the interest of global peace and pointed to UN inspectors' findings that Iran remains in compliance with the nuclear deal.
The foreign ministers said in a joint statement that the so-called "Special Purpose Vehicle" they are creating to facilitate payments on trade with Iran is intended to "assist and reassure economic operators pursuing legitimate business with Iran."
German Foreign Minister Heiko Maas told reporters there is "strong unity" between Europe and Iran on minimizing the impact of U.S. sanctions.
But despite the EU's determination to keep trading with Iran, it has struggled to come up with mechanisms and legal protections that are strong enough to convince major corporations to keep operating in Iran.
Finding a way to pay for Iran's oil exports -- which are a major driver of economic growth in the country -- has been a key sticking point. Trade in oil and other globally important commodities is almost always conducted in U.S. dollars, but U.S. sanctions prohibit Iran from using the dollar to conduct business.
Despite efforts by the EU, Iran, India, and China to maintain their imports of oil from Iran, a report from the Institute of International Finance on September 25 found that Iranian oil exports have dropped significantly already this year even though U.S. sanctions specifically targeting Iran's oil exports do not go into effect until November.
Exports of Iranian crude oil and condensates dropped by 800,000 barrels to 2 million barrels a day between April and September, the banking group said.
Based on the drop already seen in Iranian exports, the group is projecting that Iran's economy has fallen into a recession and will contract by 3 percent this year and 4 percent next year.
The report said oil exports are falling even though Iran is selling key gradeso of oil at a deep discount and using its own tankers to ship products to China and India at no extra cost.
It said Iranian shippers are also providing generous payment terms and, in some cases, accepting euros and Chinese yuan instead of U.S. dollars in payment for the oil.
Once U.S. sanctions go into effect, the group said Iran will have to rely more on barter trades to maintain its oil exports.