Domestic Economy

Interview: British Trade Envoy Gauges Iran Ties

Business & Markets Desk
There is plenty of scope for Britain to increase its trade with emerging markets and Iran is perhaps the most exciting emerging market there is today
British Trade Envoy Gauges Iran Ties
British Trade Envoy Gauges Iran Ties

The initial frenzy over Iran as a land of opportunity coming out of years of sanctions might have lost steam for foreigners seeking to tap into it, as the past two years since the nuclear deal were riddled with impediments to resumption of economic ties.

Most European countries are still trying to surmount these hurdles, including the United Kingdom.

Financial Tribune met with the UK’s trade envoy to Iran to catch up on the latest developments in Tehran-London economic relations and ask how obstacles to banking relations, Brexit and the British government’s unclear political stance toward Iran are being dealt with.

Lord Lamont, who also chairs the British-Iranian Chamber of Commerce, was appointed the UK’s trade envoy to Iran as part of a wider government attempt to reverse Britain’s underwhelming record of exports only three days after international sanctions against Iran were lifted in January 2016.

Lamont has served in successive governments under Margaret Thatcher and John Major for 14 years in the departments of energy, industry, defense and the treasury. He was also chancellor of the exchequer from 1990 to 93.

Excerpts of the interview follow:

Q: Iranian banks in the UK, such as Persia International Bank PLC, are already connected to EU’s real-time settlement system TARGET2. Why is it then that the British banks do not work with the Iranians through this system? What has kept the British banks from resuming their ties with Iran?

LORD LAMONT: Well, there is a difference between the TARGET2 system and the sterling clearing system in the UK. And there is a much smaller number of banks involved in the UK clearing system. This is a problem. And it’s one I’ve spent a lot of time discussing with the central bank of the UK, the Bank of England.

You know, we have a lot of problems with the banking system. This is largely one of the main obstacles to trade. It’s not of course just the question of the clearing system; there are also issues related to the Iranian banks getting corresponding banking relationships. That is an issue as well.

There is also a third issue, which is to do with standards of compliance–the back office. During the period of sanctions, the Iranian banks were cut off. Even though they remained open in the UK, they were not allowed to employ lawyers, not allowed to employ accountants to get the back office up to speed. So there is a lot of work to be done.

All I can do is assure you that this is on top of the agenda of the government and my agenda. There are a lot of clever people working very hard on this.

The government has done everything in its power to encourage the UK banks to process payments, finance trade and help business financially. The banks, as you know, having been the victims of very big fines from American regulators, are extremely cautions.

There has been progress made with OFAC [Office for Foreign Assets Control], the enforcing office in the United States on sanctions, where they have tried to assure banks that they would not pursue them unreasonably if they have done the appropriate due diligence, made efforts. They’ve also made efforts to clarify when they would or would not prosecute people–you know what the rules are: 10% content, US content, US nationals, etcetera.

I think people have been waiting just to see what would happen with the Trump presidency as well. So these are unresolved issues, but nonetheless some finance is getting through.

Q:What are other impediments to resuming Iran-UK trade ties? Is the British government taking any steps to address them? If so, what are the signs?

- Yes, obviously. You will see here leading British companies, like Glaxo, Jaguar Land Rover. British trade is increasing, has increased with Iran, it is up I think 47%. British trade with Iran was considerably less and shrunk more during the period of sanctions than that of a country like Germany.

So, it is to a much lower base, but it has been increasing. When you say what other obstacles are there: there are issues related to visas, you can hardly have trade without having visas, you need visas in both directions.

The ambassador is currently discussing this with the Iranian authorities, because we would like to increase the number of visas.

Q: Will Brexit be a threat or a boon to Iran-UK economic ties?

Well, I’m not sure that Brexit per se will make a huge difference, but we will obviously be placing more emphasis in the future in trying to develop trade outside Europe.

- We want to have a trade deal with the European union and continue to trade with the European union.

But, there is plenty of scope for Britain to increase its trade with emerging markets and Iran is perhaps the most exciting emerging market there is in the world today.

Q: BP opted out of the first wave of agreements to develop oil and gas reserves in Iran after the lifting of sanctions, while European rivals like Total went ahead. Why are British oil companies shying away from Iran?

- BP are not in any sense turning their back on Iran. They are interested in what is likely to come later. As I understand it and have discussed it with them, it is with the exploration and development of new fields in the north rather than, to some extent, the depleted or depleting fields in the south. The last conversation I had with BP, they emphasized to me they were enthusiastic about Iran.

Q: During an interview with al-Riyadh newspaper in Saudi Arabia, British Prime Minister Theresa May claimed that Iran was creating tension and insecurity in the region by interfering in the affairs of Arab nations. As the British government’s special envoy to Iran, how do you reconcile the UK’s stated intent to reestablish ties with Iran and the prime minister’s recent remarks?

- Well, trade is trade, politics is politics. The prime minister has made it clear that she strongly supports the JCPOA, is in favor of its continuation. I think the British government has impressed on the United States government its view that the JCPOA is valuable, should not be discarded, and Mrs. May has made it very clear that she wants to see increased trade between Britain and Iran and wants to deepen the relationship.

That doesn’t mean there aren’t political differences, but the JCPOA is a great opportunity to improve relations. Things don’t change 360 degrees overnight, they change gradually.


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