Economy, Business And Markets

Beyond the Barricade

Beyond the Barricade
Beyond the Barricade

Iranian and Turkish officials have agreed to launch a joint banking committee with four state-owned and four private banks from each country as members, marking a new chapter in banking and trade ties between the two neighbors.

Hussein Yaqoubi, Central Bank of Iran’s deputy for International affairs announced the news late Friday on the eve of the meeting of the committee slated later this month.

“The Central Bank of Turkey (CBRT) has opened an account for the CBI to be used for money transactions and revive two-way banking relations to pre-sanctions level,” IRNA quoted him as saying on the sidelines of the 25th meeting of Iran-Turkey Joint Economic Commission in Ankara.

Turkey’s Ziraat Bank also announced that it has opened an account for the CBI, according to Yaqoubi.  State-owned Ziraat Bank, which is Turkey’s second-largest bank, has a representative office in Tehran.

Three branches of Bank Mellat in Turkey are now connected to CBRT’s Clearing House, he said.  “Bank Mellat is allowed to transact money from today (Friday).” Bank Mellat has three branches, namely in Ankara, Istanbul and Izmir. Mellat obtained permission to expand its operations in that country in March 2014. The bank launched its first branch in Turkey in 1982, but was forced to discontinue when western sanctions on Iran’s banking sector intensified in 2012.

 “Export Development Bank of Iran and Turk Exim Bank also agreed to start a seven-year cooperation scheme over Turk Exim’s investments in Iran.” Turk Exim Bank is fully owned by the government and is a major player in Turkey’s export drive.

Yaqoubi said two other private Iranian lenders will also open branches in Turkey. He did not provide details. In March 2014 Iran’s Saman Bank announced it had applied to CBRT and Turkey’s Banking Regulation and Supervision Agency (BDDK) for a operating license .  Iran’s two other major private lenders, Bank Tejarat and Pasargad Bank, are also expected to reapply for a role in the Turkish finance market after Saman’s application is approved.

“Turkey welcomes the setting up of Iran bank branches in that country,” Yaqoubi said.

CBRT is also set to hold training sessions for Iranian bankers; this will help pave the way for expanding banking ties as many issues will be clarified, he added.

 A Whole New Approach

Recalling that Iran’s banking sector enjoyed ties with a handful of Turkish banks during the sanctions era, including with Halk Bank and Active Bank, Yaqoubi said those relations helped the country in its financial affairs to some extent.  “We favor the expansion of ties with Turkish banks, but this time with a new approach in the wake of sanctions relief on January 16.”

“We have defined a new set of norms and conditions, especially in terms of expenses. Imposing extra costs on banking operations is not acceptable in the new era.” he said referring the extra costs Iran had to pay for its banking transactions in order to bypass the international sanctions.  

Yaqoubi said, however, that Turkish authorities had initially some misgivings about the resumption of banking ties with Iran since they were not adequately “aware of the terms of the nuclear deal” with the six world powers.

The deal between Iran and the six world powers (five permanent members of the UN Security Council plus Germany) signed in July provided Tehran with billions of dollars in sanctions relief for curtailing its nuclear program. The deal also cleared the way for Tehran to regain access to the Swift network (Society for Worldwide Interbank Financial Telecommunication)—allowing it to transfer funds across the global electronic banking system.    

“Some major international banks have already started to work with Iran, such as Central Bank of Italy, which has opened a euro account for the CBI,” he said. “We use the account even for our oil transactions and trade with third-party countries.”

 High-Level Talks

In related news, Iran’s minister of communications and information met with the governor of the Central Bank of Turkey and the country’s minister of development. Mahmoud Vaezi called for the full resumption of banking relations between the two sides.

Highlighting the importance of banking relations for telecom expansion, he said “Fortunately, the sanctions’ years are over and Iran’s banking system now has no boundaries for building mutual cooperation with foreign banks.”

On the instruments for expanding trade between the two neighbors, he said, “As long as banking services are not fully in force, adequate facilities not provided to the private sector and bilateral investments are not fully guaranteed, the level of the trade will apparently  not meet the ceiling set by the two countries.’’

Noting that Tehran is determined to develop ties with Turkey in banking and tourism sectors, Vaezi expressed hope that the joint commission would help remove the obstacles in the way of Iranian exports to Turkey.

 Ankara Welcome Ties

Regarding the economic opportunities provided by the Joint Comprehensive Plan of Action (JCPOA) and the lifting of international sanctions against Iran, Turkey’s minister of development said, “The CBRT is keen to accelerate the normalization of monetary and banking relations with Iran.”

Cevdet Yılmaz, in a meeting with the visiting Iranian delegation said, “The expansion of the number of Turkish banks working with Iranian lenders and establishment of more Iranian banks in Turkey is vital for strengthening two-way economic relations.”

Governor of the Central Bank of Turkey Erdem Basci said that “for the normalization and enhancement of bilateral banking relations, we have regular contacts with the Central Bank of Iran (CBI).”

“Bank Mellat’s branches, already operating in Turkey, are now connected to the Swift network and we are looking forward to receiving new applications for the establishment of new Iranian banks in Turkey,” he added.

Turkey was the fourth largest exporter to Iran in the past Iranian calendar year which ended on March 19. In the preceding year (March 2014-15) it was the 6th major importer of non-oil goods from Iran.

The two countries also maintain close energy ties. Turkey is one of the major customers of Iranian gas and imports 10 billion cubic meters of the product every year.