Sanctions Removal Bedeviled by Banking Hurdles
A year has passed since Iran’s nuclear accord was implemented, but a number of business community representatives are of the belief that there is still a long way to go until things normalize.
“With the agreements between the Central Bank of Iran and other central banks and of course with the agreements between our commercial banks and their international counterparts, banking transactions are now possible,” the head of the Trade Facilitation and Export Development Commission of the Tehran Chamber of Commerce, Industries, Mines and Agriculture said in a talk with Exim News website.
“Iranian merchants and businessmen can now reopen letters of credit in a number of countries, but our problems with countries that work with US dollar have yet to be solved,” Mohsen Bahrami Arz-Aqdas added.
Iran’s nuclear accord was reached with the P5+1 countries and the European Union, and was subsequently implemented on 16 January 2015.
Noting that U-turn transactions, which must take place with the greenback and through the Federal Reserve, still prove very problematic, the official said dollar transaction troubles still persist not as a result of nuclear sanctions, but because of other issues between the two arch-rivals.
Arz-Aqdas, however, noted that a directive issued by the US Treasury allows other countries to engage in dollar transactions with Iran without fearing sanctions.
A U-turn transaction, generally speaking, is a banned financial transaction done by a bank in country A (example: USA) for the benefit of a bank in country B (example: Iran) through offshore banks (example: Switzerland).
“We hope that in our future negotiations with P5+1, we can resolve our issues with other international banks and Iranian banks will soon be able to use the software to connect with the global banking system,” he said.
“International experts are the most important forces that our banks lost in the past 10 years and this section of the human resources must be strengthened.”
Sanctions Not Yet Removed
Meanwhile, the deputy head of Iran-China Chamber of Commerce and Industries believes that the shadow of sanctions continues to hang over the country.
“Sanctions are still not removed and the country is under their influence,” Majid Reza Hariri added, noting that “only when Iranian businessmen are able to have smooth banking relations with international companies that we can say sanctions have been lifted”.
The official also said the share of Chinese private sector in its own economy stands at 80%, while “unfortunately the same share is 25% for Iran and the government needs to pay more attention to this issue”.
Hariri stressed that Iran and China must strive to make future business deals outside of oil-related industries because trade between the two countries has been significantly influenced by crude oil prices.
When oil prices were high, he said, the volume of trade between Iran and China reached $52 billion while it plunged to $32 billion with the oil price fall.
The central bank published a report this week, detailing the achievements of the country’s nuclear accord with world powers in the banking and monetary sectors.
The report notes that from the implementation day of the JCPOA until 22 December, 13,995 letters of credit worth $12.8 million were opened and also states that more than $9.9 billion of the central bank’s frozen oil money were released and repatriated from the UAE, Britain, India, Greece, Italy and Norway. Since the removal of international banking restrictions in January, Tehran has secured links with only a limited number of smaller banks, as US sanctions remain in force and large foreign institutions still fear potential fines.