EU open to Iran sanctions after foiled France, Denmark plots -diplomats

By Robin Emmott

BRUSSELS (Reuters) - European Union foreign ministers showed cautious support on Monday for possible new economic sanctions on Iran in a shift of policy after accusations of Iranian attack plots in France and Denmark, diplomats said.

Denmark and France briefed their EU counterparts at a meeting in Brussels on the alleged plots and ministers agreed to consider targeted sanctions on Iranians in response, although no details or names were discussed, five diplomats told Reuters.

Though still at an early stage, the EU's readiness to penalise Iranians would be the first such move in years after months of internal division over how to punish Iranians accused of destabilising activities in Europe and the Middle East.

Until now, the EU has been straining to uphold the 2015 nuclear accord between Iran and world powers that U.S. President Donald Trump pulled out of in May. It has been less willing to consider sanctions, instead seeking talks with Tehran.

Iran has warned it could ditch the nuclear deal if EU powers do not protect its trade and financial benefits.

France has already imposed sanctions on two Iranians and Iran's intelligence service over what it says was a failed plot to carry out a bomb attack at a rally near Paris organised by an exiled Iranian opposition group. One option is to establish those asset freezes at an EU-wide level, diplomats said.

Denmark, which in October said it suspected an Iranian government intelligence service had tried to carry out an assassination plot on its soil, is also open to EU-wide sanctions, the diplomats told Reuters.

In October, France said there was no doubt that Iran's intelligence ministry was behind the June plot to attack the demonstration by Iranian exiles near Paris.

It froze assets belonging to Tehran's intelligence services and two Iranian nationals - a Vienna-based diplomat now under arrest in Belgium for the plot and the deputy minister and director general of intelligence, Saeid Hashemi Moghadam.

Neither appear to have held any assets in France. Paris also discreetly expelled an Iranian diplomat, diplomatic sources told Reuters last month.

Iran has denied any involvement in either alleged plot.

Under the 2015 deal, Iran restricted its disputed nuclear programme, widely seen in the West as a disguised effort to develop the means to make atomic bombs, in exchange for an end to international sanctions against it.

MISSILE SANCTIONS DIDN'T FLY

In March, Britain, France and Germany proposed to sanction Iran over its development of ballistic missiles and its role in Syria's war, but the initiative failed to gather sufficient support across the EU to take effect.

Italy was one EU country unwilling to countenance new measures as it sought to preserve business ties with Iran.

In an effort to balance Iran policy, the ministers at their meeting on Monday also tried to press ahead in setting up a special mechanism to trade with Iran that could be under EU, not national, law.

The Special Purpose Vehicle (SPV) is a kind of clearing house that could be used to help match Iranian oil and gas exports against purchases of EU goods in an effective barter arrangement circumventing U.S. sanctions, which are based on global use of the dollar for oil sales.

Despite technical difficulties and delays, the EU believes this formula could shield individual member states from being hit by U.S. sanctions that have been reimposed on trade with Iran after Washington's pullout from the nuclear deal.

"There is a willingness for the financial vehicle ... to be set up quickly," French Foreign Minister Jean-Yves Le Drian told reporters.

However, no country has come forward as a potential host. Their reluctance arises from fears that SPV reliance on local banks to smooth trade with Iran may incur U.S. penalties, severing the lenders' access to U.S. markets, diplomats said.

Luxembourg is seen as a good candidate to manage the Iran SPV given its experience in creating a similar mechanism during the 2009-12 euro zone financial crisis.

(Reporting by Robin Emmott; Editing by Alastair Macdonald and Mark Heinrich)

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