Britain’s vote to leave the European Union and the rise of US presidential nominee Donald Trump have paralyzed efforts by western governments to encourage already highly reluctant international banks to do business with Iran.
Under the nuclear deal, international financial sanctions on Iran were officially lifted in January this year and yet it has secured banking ties with only a limited number of smaller foreign institutions.
One senior unidentified Iranian official told Reuters Tehran was examining alternatives. “Iran will continue to work with small banks, institutions as long as major European banks are reluctant to return to Iran,” said the official.
“Our estimation is that this uncertainty will continue for a few years. We are in talks with many countries, mainly China, Russia and African countries to widen our banking cooperation aimed at resolving existing banking, financial problems.”
US banks are still forbidden to do business with Iran under domestic sanctions that remain in force. European lenders also face major problems, notably rules prohibiting transactions with Iran in dollars - the world’s main business currency - from being processed through the US financial system.
Britain says it remains committed to tackling the banks’ concerns, while the US Treasury says it won’t stand in the way of legitimate business with the country.
However, Iranian officials and foreign bankers believe the British political upheaval after last month’s referendum has distracted governments in London and other European capitals, while the possibility that the shock will send the British economy into recession has deepened banks’ caution yet further.
“Fear over Brexit’s financial consequences have made Britain and other European countries more careful over their interaction with Iran. Most of them have adopted the policy of watch and see,” another senior unidentified Iranian official told Reuters.
Not interested
“The British banks and authorities have a very big problem to deal with and since the vote, they have been less eager about Iran and I can even say almost not interested. Of course, we believe we can still work with British banks and have told them so.”
European banks have generally cited the US elections as a political risk, while avoiding detailed comment on how a victory for the Republican nominee Trump might affect their business.
However, another Iranian official, who also declined to be identified, said the election and Trump’s promise to tear up the Iran nuclear deal if he wins was complicating Tehran’s efforts.
“Major European banks are worried about its outcome. An official from a German bank told us recently that they could not risk getting involved in Iran especially when Trump was a candidate,” the official said.
A US Treasury spokeswoman said Treasury officials were not going to stand in the way of permissible business activities with Iran. They had travelled worldwide to provide guidance to governments, companies, and financial institutions, she noted.
On July 12, Britain’s Foreign Office said a meeting between Iran’s central bank, the US Treasury, British officials and international banks in London had been postponed.
The resignation of prime minister David Cameron following the Brexit vote and a cabinet reshuffle by his successor Theresa May, who took office on July 13, has complicated matters.
“The new government has bigger priorities related to Brexit and the impetus to push the banking issue is likely to take more of a back seat now. Iran relations will also be affected by officials moving to other offices due to Brexit,” a western source said.
A Foreign Office spokeswoman said it was in both countries’ interests that legitimate business was supported. “Some challenges remain, but we are committed to working through them with international partners, Iran, and the banking community,” she said.
A British trade visit to Iran scheduled for May was postponed. Banking sources said this was partly due to bankers’ reluctance to join it. A British official said the new government was keen for the visit to go ahead this year.
But the UK sanctions manager was skeptical: “I would be hugely surprised if any of the UK banks would go. I do not think any of the banks want to stick their head above the parapet.”
