Economy, Business And Markets

Restoration of Int’l Banking Ties Slow

Restoration of Int’l Banking Ties SlowRestoration of Int’l Banking Ties Slow

Reestablishing trust and reconnecting with international banks is a long-term and difficult enterprise, Mehdi Kasraipour, director of the Central Bank of Iran’s Foreign Exchange Department said.

“We have to go through negotiations with foreign banks one by one in order to reestablish correspondent banking relations,” he said in an interview with ILNA this week.

The CBI official noted that reestablishing ties is not like pressing a button and requires time and planning. “The lifting of sanctions on January 17 does not mean that all the problems will be gone overnight and ties would be reestablished very soon with the world.”

In January, Iran and six leading powers — US, Britain, France, Russia, China and Germany — implemented an agreement that was signed in July when Tehran agreed to scale down its nuclear activities in return for lifting of some sanctions.

As part of the sanctions relief, Iran’s banks are being reconnected to the Swift international payments system, which cut them off after international sanctions were tightened four years ago. However, bankers say there have been few, if any, Iranian payments via Swift, mainly because few foreign banks are willing to deal with them. The issue has evolved into a political debate in the country with hardliners claiming that the nuclear deal has not produced anything of economic value as promised by the Rouhani administration and the six powers.

To calm fear the Central Bank of Iran invited the press on Monday to demonstrate live that the banking industry was in effect reconnected to Swift.

Asked about the time Iranian banks will have access to dollar-denominated transactions, Kasraipour said no specific timeframe can be mentioned because “Such transactions are banned under the US primary sanctions.”

On Tuesday US Secretary of State John Kerry acknowledged that Iran deserves access to US dollar deals and enjoy full economic benefits of the July 2015 nuclear deal because it has upheld its core obligations under the historic pact.

In an interview with MSNBC, Kerry pointed to the recent efforts by the US administration to give Iran limited access to the dollar currency. “We are working very hard to do what is fair,” he claimed.

Kasraipour elaborated by saying the US had imposed two types of sanctions against Iran. The primary sanctions had nothing to do with Iran’s nuclear dossier while the secondary were put in place because of the dispute over the nuclear energy program.

“Now the secondary sanctions are lifted but the primary ones are still in place and prohibition of payments and transactions in the greenback is included under the primary sanctions.”

The senior banker said most of the transactions between Iranian lenders and their foreign counterparts are in euros adding that the currency used in transactions depends on the country doing business with Iran. “For instance we use the UAE dirham in trade with that country or the yuan and euro in transactions with China.”

Pointing to Iranian banks’ reconnection to Swift, he said all banks have used the opportunity to some extent to reestablish correspondent banking ties with their foreign peers. “Banks are working on their own to get back to the pre-sanctions level of comprehensive and extended ties with international banks.”