Economy, Business And Markets

Tehran Expects Progress on Easing Banking Restrictions

Iran is pressing the United States to ease banking obstacles.Iran is pressing the United States to ease banking obstacles.

Iran is pressing the United States to ease banking obstacles to the reopening of trade under last year’s nuclear deal and hopes for progress on the sidelines of United Nations meetings in New York this week, an Iranian official said as reported by Reuters.

The country’s national airline has provisionally agreed to buy US and European aircraft worth over $50 billion at list prices, marking a high-profile test case for the reopening of its economy under a deal with world powers to ease sanctions.

Nine months after the sanctions deal took effect, foreign banks are reluctant to get involved because of concerns that they could be caught up in restrictions applying to US banks, which are still banned from doing business with Iran.

Under the deal to lift nuclear-related sanctions, Iran can buy passenger planes and other goods but is not allowed to pay for them in dollars or to use the US financial system, due to core US sanctions that remain in force.

The ban on paying in dollars is a particular headache for Boeing and international leasing companies, which usually account for their portfolios in the world’s leading currency.

Paying in other hard currencies could generate fleeting movements in the US financial system known as U-Turn transactions, which are also banned.

“We are negotiating and I hope that during the trip of President (Hassan) Rouhani to the US, we can have some news on the subject,” Deputy Roads and Urban Development Minister Asghar Fakhrieh Kashan told foreign investors at the CAPA Iran Aviation Finance Summit in Tehran.

Iran Air chief Farhad Parvaresh is traveling to New York as part of Rouhani’s delegation for the UN General Assembly.

The United States has said it has no plans to reinstate “U-turn” authorization, which would allow foreign banks to use its financial system to transfer funds for some Iran-related trade.

Iran wants to pay Boeing in dollars but failing such an agreement - which many observers consider unlikely - it wants the US Treasury’s Office of Foreign Assets Control (OFAC) to approve the financing as part of a separate process under which it must also grant licenses before jets can be exported to Iran.

Industry sources say Boeing is talking to third-parties about handling the transactions and paying it in dollars, but is unlikely to proceed without clear guidance from Washington.