It is not every day that you get an opportunity of a lifetime but when you have it, one should not miss that. The European Union clearly has this at their doorstep and they should thank the president of the United States, Donald Trump, for deciding to pull out of the Iranian nuclear deal.
Really? Of course, every situation has two angles. It all depends where you focus more.
I think the current situation could make the EU position a lot stronger, and it is an opportunity for France and Germany to play a global role and emboss the euro as an alternative benchmark currency like the U.S. dollar.
This is not a new idea at all. After all, the birth of the euro was based on the idea that it would become an alternative reserve currency, a benchmark which countries could use to trade.
Thanks to the evolution of the cryptocurrency king, Bitcoin, countries are open to trade the most important commodity - oil - by using Bitcoin. Russia, a longtime rival of the U.S., has bounced this idea and a few others have nodded to this. Trump has just put fuel to the fire by pulling out of the nuclear deal and imposing sanctions on Iran.
Iran seesawed about accepting Bitcoin and had a soft to hard stance toward Bitcoin. But mostly there was no clear idea about the cryptocurrency. However, after Venezuela showed the world that the cryptocurrency could be the route to block sanctions, I think Iran should be very serious in looking at the options of how to explore further avenues, which would not hurt its economy. The country is in a much stronger position, and it is well prepared as compared to the previous occasions. There are more options on their doorsteps now, and this would limit the damage to the economy.
The EU: France, Germany and the U.K. are not pleased with the U.S. situation especially, France particularly. The president of the country, Emmanuel Macron, has played a distinct role to keep the U.S. in the deal. The country has large exposure in Iran, and the EU needs to protect the mini-boom in trade. The number stands at €20 billion for last year, and this number has tripled from the pre-deal low of €6.2 billion back in 2013.
EU, France, Germany and the U.K. will meet Iran on May 15, and the discussion would involve one key area; Iran needs assurance that the nuclear deal will not be sabotaged. The EU would be interested in defending the interest of the European companies, and they would have to find a solution or way around the U.S. sanctions.
Of course, if Bitcoin had progressed further with the regulators, the cryptocurrency would have been seen as one of the options, but for now, it would not be the option. But, it is my opinion that the EU would speed up the process of legitimizing Bitcoin by the regulators so that they have an alternative to the dollar. If Donald Trump pushes the SEC to void that somehow, that would be a different argument, especially considering how far he could go with that.
A shining option on the table would be loans denominated in euro. The EU should show the U.S. that they are fully capable of salvaging the deal forged under the Obama administration. The EU must take this opportunity to show the strength of the European Bank and its currency.
Italy already issued a euro-based sovereign credit line worth €5 billion. so bilateral deals could easily be done with the help of the European central bank. Most importantly, Banque Delubac & Cie, a family-owned bank in Paris, has deep roots in Iran and under the French treasury suggestion it is active in building commercial ties.
EU would have to convince the companies such as Total, Airbus, Sanofi, Renault, Peugeot (just a few names which come to mind), which need assurance from both sides—Iran and the EU—to continue their involvement.
As long as they are complying with the EU regulations and the loans are euro-denominated with no exposure to the dollar, the common currency and the EU could create an example like no other.
