EU plan to evade Trump's Iran sanctions collapses
EU member states are worried about provoking US punishment, diplomats said according to Reuters.
Germany, France and the UK are expected to call on Luxembourg to host the Special Purpose Vehicle, turning to the small member state after Austria declined.
EU lawmakers have also vowed to press ahead to maintain trade ties with Iran.
"We Europeans cannot accept that a foreign power, not even our closest friend and ally, takes decisions over our legitimate trade with another country," said Vera Jourova, European Justice Commissioner.
European leaders have been scrambling to salvage the landmark 2015 Iran nuclear deal signed with world powers after US President Donald Trump withdrew from the accord in May.
The Trump administration also reimposed two sets of sanctions, the latter coming into force on 4 November and targeting Iran's access to the US financial system.
Tehran has warned it could scrap the agreement if European leaders cannot guarantee economic benefits against US sanctions.
The SPV could be used as a barter system to circumvent US sanctions as the dollar is used to conduct oil sales globally, and is seen as the lynchpin to salvage the accord.
Reluctance to host the SPV stems on fears that local banks, which would be used to facilitate trade with Iran, could get slapped with US penalties.
Luxembourg has emerged as a strong possibility because it had set up a prior SVP with Iran during the 2009-2012 eurozone financial crisis.
A failure to maintain economic benefits to Iran, which prompted Tehran to pursue the nuclear accord in the first place, would embolden hardliners there.
On Tuesday, the Trump administration said it would target Europeans that went against US sanctions.
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