Economy, Business And Markets

Rial Gains on Eve of Sanctions Relief

Rial Gains on Eve  of Sanctions Relief  Rial Gains on Eve  of Sanctions Relief

Rial gained 1.3% against the US dollar in Saturday trading as diplomats gathered in Vienna to announce the end of international economic and banking sanctions against Iran.

The Greenback was bought for 35,950 rials in Tehran, down from Thursday's 36,450 rials.

Rial's bullish trend comes as the currency depreciated against most foreign currencies in the past six months, stoking fears that the market was refusing to respond positively to the optimism surrounding the nuclear deal with the six world powers reached in July.

The benchmark TEDPIX index gained 2 % to 64,860.9 at the close in Tehran, the highest level since Aug. 23, data posted on the Tehran Exchange’s website showed.

Foreign Minister Mohammad Javad Zarif said sanctions will be lifted on Saturday once the UN nuclear agency reports that the Islamic Republic has fulfilled all its commitments under nuclear agreement. The move will unlock billions of dollars in frozen accounts and pave the way for a surge in Iranian oil exports as well as foreign investments into the country.

The historic accord imposes restrictions on Iran’s nuclear program in return for the lifting of oil and financial sanctions that have cut off domestic banks from the international system and prevented aviation companies from upgrading aging fleets.

Access to Int'l Lenders

Hussein Yaqoubi, deputy chief of the Central Bank of Iran for international affairs said Saturday that following the lifting of the sanctions Iran will be able to access loans from international financial institutions and those offering preferential loans, for its development projects.  

"Once sanctions are lifted, all Iranian entities including the CBI and the banking industry in general will be removed from the embargo list and regain access to blocked assets," the CBI website quoted him as saying.

Banking relations with the outside would normalize, according to the official. "Both domestic and foreign banks then can issue letters of credit or bank guarantees."

Iranian banks would be able to open overseas branches, corresponding offices or affiliate companies. "Foreign banks and companies can also conduct similar operations both in the mainland and free trade zones."

He noted that reconnecting to SWIFT interbank messaging system would be a major achievement as there would be no more restrictions for banking operations, insurance and reinsurance coverage, transportation and other services in international commerce.

The government would be able to issue bonds and there would be no restriction for trading in gold and other precious metals.

Yaqoubi added that after the lifting of the ''secondary sanctions,'' the US would be able to sell dollars to Iran, but American entities would still be banned from working with Iranians.

Iran and the P5+1 (permanent members of the UN Security Council plus Germany) signed a landmark accord last July to curb Iran's nuclear program in exchange for sanctions relief. The deal is expected to come into effect by the weekend.