The fact that Iranian banks have not yet been able to establish full correspondent relations with their European counterparts more than three months after the sanctions ended has been a subject of much debate across political lines. The political opponents of President Hassan Rouhani have effectively used (abused) the issue in their reasoning that the nuclear deal with world powers is all but useless.
Ahmad Hatami Yazd, a monetary analyst and former chief executive of Bank Saderat Iran has reflected on the problem in an analysis posted on the website of the Tehran Chamber of Commerce. He says normally it takes three months for lenders to establish full correspondent banking relations with foreign banks. However, for Iranian lenders the wait has become a bit too long.
He is of the opinion that the European lenders’ fear of normalizing relations with Iran stems from their bitter experience of penalties imposed on them by the United States during the sanctions’ era. Iranian banks and companies are not still able to transfer money or use other international banking services due to this major hurdle.
“European lenders are very cautious in dealing with Iran. As long as they are not sure about the US green light for reconnecting with Iran they will not fully commit to do so. They have told Tehran that it should (first) settle the issue with the US if it wants access to European lenders,” Hatami wrote.
He referred to the US’s influence in the global financial arena saying that America accounts for 25% of the world’s income. Due to this strong presence and impact on global markets, European banks are reluctant to resume relations with Iran and are visibly mindful of Washington’s fury.
Greenback Power
Pointing to the restriction for Iranian lenders to handle dollar transactions, Hatami wrote “we have to accept that the greenback is still the dominant currency in the world markets and any dollar transaction in any part of the world is subject to US scrutiny.”
The importance of dealing is dollars is indispensable for Iranian banks and companies. As such, reconnection to the world economy is incomplete without “having access to dollar transactions”.There is a need for a crystal clear message from Washington announcing that doing business with Iran and Iranian banks is ok as far as the US is concerned. We’re hopeful that the Zarif-Kerry talks and Seif’s negotiations in the US will bear fruit.”
Valiollah Seif, governor of the Central Bank of Iran was in Washington last week on the sidelines of the International Monetary Fund and World Bank meeting. He called on US officials to respect their commitments under the nuclear agreement. Foreign minister Mohammad Javad Zarif also met his US counterpart John Kerry at the same time where the two reached some common ground in expediting Iran’s access to global financial markets.
The Obama administration has not yet executed its pledges and commitments under the Joint Comprehensive Plan of Action, the former official said. Under the present conditions there is only one way out of this predicament, he wrote. “If the European countries realize that their interests lie in boosting ties with Iran, they will pressure the US to give them the signal and a free hand to do business with Iran.”
Hatami noted that most European powers want to increasing their exports to Iran sooner rather than later, but the banking problem remains a major hurdle. “True, the European governments have told their banks to restart relations with Iran. However, this pressure should also be exerted by European countries on the US.”
He acknowledged that no specific date can be set for a full reconnection between Iranian and European lenders simply because “the key to the issue lies in the political negotiations between Tehran and Washington.”
