UK pledges to expand trade relations with Iran despite dire US warnings over sanctions
The UK has said it will expand trade relations with Iran in the face of US warnings that European firms face "painful" consequences if they continue to do business in the country.
Speaking hours after sweeping new sanctions went into force, Mike Pompeo, the US secretary of state, warned businesses not to use a special channel being set up by the EU to allow ongoing trade with Tehran.
“I promise you that doing business with Iran in defiance of our sanctions will ultimately be a much more painful business decision than pulling out of Iran,” Mr Pompeo said.
In a statement the government said it encouraged UK firms to "take advantage" of commercial opportunities with Iran and said work is being carried out on protecting businesses from the impact of secondary sanctions.
"We regret the re-imposition of sanctions by the US," the Prime Minister’s official spokesman said.
"We continue to fully support expanding our trade relationship with Iran and encourage UK businesses to take advantage of the commercial opportunities that arise."
The UK, France, Germany and the EU are eager to see businesses continuing to deal with Iran, believing that if Iran does not see economic benefits from the 2015 nuclear agreement it will scrap the deal and resume enriching uranium.
In response to the latest US sanctions, the European powers said they would push forward with a Special Purpose Vehicle (SPV), a financial mechanism designed to allow firms to get around American restrictions.
“Our collective resolve to complete this work is unwavering,” the UK, France, Germany and the EU said in a joint statement.
Meanwhile, the US and Iran continued to trade threats and taunts as the American sanctions went into force on Monday. The US sanctioned 700 Iranian people, businesses, aircraft, and ships in what it said was the “largest ever single-day action targeting Iran”.
Hassan Rouhani, the Iranian president, said his country would continue selling oil and break the US sanctions. "We are in the economic war situation. We are confronting a bullying enemy. We have to stand to win,” he said.
Mr Pompeo demanded that Iran not only abandon its nuclear programme but also stop funding militant groups in the Middle East, pull out of Syria, and “abandon its current revolutionary course”.
“The Iranian regime has a choice: It can either do a 180-degree turn from its outlaw course of action and act like a normal country, or it can see its economy crumble,” Mr Pompeo said.
While the sanctions are widespread, the US issued waivers to eight countries – China, India, Italy, Greece, Japan, South Korea, Taiwan, Turkey – to allow them to continue buying Iranian oil.
Mr Pompeo said the waivers were only temporary and the US was still aiming to fully choke off Iran’s oil exports. Some hawkish Republican senators have criticised the waivers for giving Iran breathing room.
Brian Hook, US special representative on Iran, said that firms which used the EU’s SPV to trade with Iran risked being barred from the US market. He also declined to rule out US sanctions on whichever European country ends up hosting the SPV.
The SPV is not yet operational and European governments are reportedly struggling to design the mechanism and to agree which country will host it.
Mr Hook was largely dismissive of the European effort to get around US sanctions and said he did not expect that major EU firms would risk using it. "We have not seen much, if any, demand for the SPV,” he said. “We do not anticipate any significant corporation using a SPV."
Around 100 companies have so far pulled out of the Iranian market or cancelled plans to invest in Iran because of the threat of sanctions, according to the US. Volvo halted its plans for a truck assembly in Iran in September, while Boeing withdrew from a £15 billion contract to sell aircraft.
The Belgium-based Swift financial messaging service said it is suspending some Iranian banks’ access to its system in the interests of the stability of the global financial system.