International banks are shying away from processing humanitarian deals with Iran for fear of being fined for breaking western sanctions, despite moves intended to facilitate the trade, a senior Iranian banker said.
The sanctions regime, imposed by the United States and European Union over Tehran’s nuclear energy program, allows trade in humanitarian goods such as food and medicine.
Yet many banks avoid any dealing with Iran due to the heavy fines—such as a $8.9 billion penalty imposed on BNP Paribas of France—handed out by US authorities for trading with sanctioned countries including the Islamic Republic.
Tehran-based Middle East Bank, which is privately owned by investors that include small and medium-sized Iranian firms who can each hold up to a 5 percent stake, started operations on Nov. 1, 2012 with a focus on the humanitarian trade. Nevertheless, the bank continues to find it difficult to get deals processed, its chief executive, Parviz Aghili, said.
“Going through the very simple process of opening letters of credit for the importation of goods, even humanitarian goods, has become a hassle,” Aghili told Reuters in an interview.
“The (international) banks just do not want to take the risk. They understand and tell us that the rules and regulations are there. But they say the expected return is not enough to justify the risk. They tell us, ‘if anything goes wrong, we would be faced with huge fines’. And this is what happens to 99 percent of foreign banks.”
Iran has been trying to get HSBC—a London-based multinational banking and financial services company—to process humanitarian transactions it has frozen because of concerns about potential breaches of sanctions.
US officials stress they have expanded licenses issued for food, agricultural goods, medicine and medical devices to Iran.
They have also set up two “humanitarian channels” in Europe and Asia to facilitate legal trade with Iran, a system which includes an approved list of international companies which can do business there, with several commercial banks also involved.
Since tougher, nuclear-related sanctions were first imposed in 2006, western governments have taken a wide range of steps against Iranian firms by freezing their assets, blocking trade and preventing them from doing business with western banks.
Aghili said the impact of sanctions and restrictions on Iranian banks “at the outset ... was not as bad, as many banks did not know what to do”.
“But gradually it has gotten worse and worse. We certainly have seen no improvement during (Iranian President Hassan) Rouhani’s term at all. We do not need any financing, it is our own money and we still cannot execute these transactions.”
Designated Bank
Middle East Bank, also known as Khavarmianeh Bank, has total assets close to $1 billion and was designated as a sanctioned company by the US Treasury on Aug. 29.
The US Treasury issued a statement in August saying Middle East Bank had been placed on the Treasury’s designated list as part of an executive order signed by President Barack Obama in February 2012, that blocked the assets and property of Iranian financial institutions.
“Obama signed it to cover the government of Iran, the Central Bank of Iran and all the financial institutions in Iran. Whether we like it or not we are on the list simply because we are registered in Iran and because our license is issued by the government of Iran, not that we have done anything,” Aghili said.
“Even though we are designated, which is constraining our activities even with humanitarian goods, we should not be considered as an unacceptable bank,” he said. “But you go ahead and try to convince the international banks - you get nowhere. I suppose no one can blame them after the BNP fine.”
Aghili said “no state or state-affiliate had any stake” in the bank.
Iran and world powers, known as the P5+1, are trying to agree a nuclear deal before a Nov. 24 deadline, but the most recent talks in New York last month made little progress.
