European Payment System Isn’t a Pipe Dream
A German proposal for thwarting U.S. sanctions on Iran could work. Just look at Russia’s banks.
Let’s agree to disagree.
Photographer: Marlene Awaad/Bloomberg
As President Donald Trump increasingly strains ties with U.S. allies, German leaders, including Chancellor Angela Merkel, have suggested that their country and other European nations should take steps to lessen their dependence on America. Now, Foreign Minister Heiko Maas has called for the creation of “U.S.-independent payment channels” to help shield European companies from unilateral U.S. sanctions such as the ones Trump has imposed on Iran.
That may sound unrealistic given U.S. dominance in financial markets: Any such payment channels would have to go through financial institutions that don’t have exposure to the U.S. dollar. According to the Bank for International Settlements, non-U.S. banks’ $12.6 trillion of dollar-denominated assets rival those of U.S. banks. Although European banks cut their dollar exposure by 42 percent between 2007 and 2017, they still have big positions: German banks’ outstanding dollar claims at the end of the first quarter of 2018 reached $502 billion.