I ranians headed for nature to spend the 13th day of the new Iranian year shaking off misfortune, in a ceremonial way. Some were eyeing Lausanne, Switzerland. Late at night Iranians received the best news in decades: Iran made a framework agreement with six world powers, ensuring the “exclusively peaceful nature” of its nuclear activities, heralding the lifting of all economic sanctions related to the issue. That means a new era of business activity for the 80 million nation.
Perhaps none were more delighted than the governor of the Central Bank of Iran whose bank was specifically named in the joint statement made by Iranian Foreign Minister Mohammad Javad Zarif and EU Foreign Policy Chief Federica Mogherini. Sanctions against the bank will be lifted.
The CBI has suffered tremendously since the intensification of sanctions in 2012 and its expulsion from the SWIFT global interbank messaging network. The bank reportedly has about $130 billion frozen overseas due to the sanctions.
Iran’s commercial lenders have also been victims of the financial sanctions leveled against them by the European Union and the United States. They were cut off from their overseas businesses and transactions with their foreign counterparts. Now they can rejoice normalization.
Also European banks can finally rest from prosecution by US authorities. They have had a rough couple of years, with fines paid by them for breaching sanctions reaching $15 billion. They can also revive their business with Iranian lenders and even enter Iran’s banking market directly.
Exhausted Negotiators Reach a Deal
The talks between Iran and the P5+1 – Britain, China, France, Germany, Russia and the United States – blew past a self-imposed March 31 deadline with no certainty that they would not end in failure. Yet, after eight days of marathon talks, a Joint Comprehensive Plan of Action (JCPOA) was reached. The negotiators left till June 30, to work out the details of the final deal.
Many details still need to be worked out. Diplomats close to the negotiations said the deal was fragile. It could not be ruled out that the understandings reached could collapse between now and June 30. Some experts believe it will be much harder to reach a final deal than it was to agree the framework accord.
Under Thursday’s agreement Iran will receive relief from US and EU sanctions as it complies with the terms of a final deal. “We’re still some time away from reaching where we want to be,” said Zarif.
High Hopes
But not all is as rosy as it may seem at first glance. The sanctions and prosecutions will remain in place till the end of June. If the deal is implemented, there is still a long way to the lifting of sanctions.
Based on statements made by officials on both sides of the isle, and a fact sheet released by Washington, all nuclear related sanctions will be lifted as Iran’s commitments are verified by the International Atomic Energy Agency (IAEA).
US and EU nuclear-related sanctions will be suspended after the IAEA has verified that Iran has taken all of its key nuclear-related steps – a time-consuming process.
All past UN Security Council resolutions on Iran’s nuclear issue will be lifted simultaneous with the completion, by Iran, of nuclear activities addressing all key concerns.
However, core provisions in the Security Council resolutions – those that deal with transfers of sensitive technologies and activities – will be re-established by a new resolution that will endorse the JCPOA and urge its full implementation.
The verification will take time, so the CBI is likely to have to manage 2015 without its funds and connection with other financial entities outside Iran. Iranian lenders will also have to do without much foreign business. European banks should also keep up their guard and closely monitor their financial transactions for the time being, lest they wish to avoid further US prosecution for sanctions’ violations.
Though not immediately, the JCPOA will bring about the normalization of financial relations with the West. The psychological effect of the deal on Iran’s foreign exchange market will definitely help the bank unify the foreign exchange regime – an elusive aim perused by the CBI. Later with invigorated resources the bank can become a force to be reckoned with.
There are untold opportunities for bankers in the midst of the normalization process, and many are getting ready for the race that’s about to begin for Iran’s financial sector. For now, it seems Iran’s fortunes have taken a turn for the better. It could not have come at a more providential date than Farvardin 13.
