The stage is set for a major confrontation between the US and EU over Trump’s sanctions on Iran.

The Wall Street Journal reports Europe Plans ‘Special Vehicle’ to Maintain Companies’ Ties to Iran, Avoid U.S. Sanctions.

The European Union said late Monday that it would establish a special payment channel to allow European and other companies to legally continue financial transactions with Iran while avoiding exposure to U.S. sanctions.

The move is a direct rebuke of President Trump’s policy on Iran and his decision to withdraw from the nuclear deal in May, and sets the stage for a confrontation between the U.S. and Europe in the days ahead at the U.N. General Assembly, where Iran is among the prominent themes.

EU foreign-policy chief Federica Mogherini and Iran’s Foreign Minister Javad Zarif made the announcement of a “special purpose vehicle” jointly, in English and Farsi, after a meeting at the U.N. of the parties still committed to the deal—Iran, EU, U.K., France, Germany, Russia and China.

The mechanism—the details of which would be set up in future meetings with technical experts—would facilitate payments related to Iran’s oil trade, exports and imports, and “reassure economic operators pursuing legitimate business with Iran,” the statement said.

Ms. Mogherini said Iran has remained fully committed to its obligations under the nuclear deal, as certified by a dozen reports from U.N.’s nuclear watchdog, the International Atomic Energy Agency.

Europe has Excuse to Challenge the Dollar

Bloomberg writer Leonid Bershidsky says Europe Finally Has an Excuse to Challenge the Dollar

With more and more European companies fleeing Iran following the re-imposition of U.S. sanctions, it may be tempting for Americans to write off Europe’s efforts to save the Iran nuclear deal. It would be wiser to resist the temptation. A new plan by Germany, France, Britain, China and Russia to create special financial infrastructure to work with Iran could be a credible challenge to the U.S. dollar’s long global dominance.

Federica Mogherini, the European Union’s top foreign-policy official, said in New York on Monday that the plan to create a “special purpose vehicle” for trade with Iran “will mean that EU member states will set up a legal entity to facilitate legitimate financial transactions with Iran, and this will allow European companies to continue trade with Iran.” The technical details are still to be worked out, but her wording provides some useful hints on how the scheme will work.

Mogherini indicated that Germany, France and the U.K. would set up a multinational state-backed financial intermediary that would deal with companies interested in Iran transactions and with Iranian counter-parties. Such transactions, presumably in euros and pounds sterling, would not be transparent to American authorities. European companies dealing with the state-owned intermediary technically might not even be in violation of the U.S. sanctions as currently written. The system would be likely be open to Russia and China as well.