Iran has launched corresponding relations with banks in Switzerland, Italy, Germany and Belgium following the lifting of the sanctions on January 16, said an official in the Central Bank of Iran.
Iran reached an agreement with the United States and five other world powers last summer giving the country billions of dollars in sanctions relief. The deal also paved the way for Tehran to regain access to the Swift network (Society for worldwide Interbank Financial telecommunication)—allowing it to transfer funds across the global electric banking systems. This, in turn, allowed it to reestablish ties with foreign banks, whose fear of US penalties still discourages them from full-engagement with banks and business with the Islamic Republic.
“Traders mostly asked for euro and Turkish lira in the last fiscal year (ended March 19), and we managed to meet their foreign currency needs after the sanctions were removed," Mohammad Darabi, CBI's foreign exchange supervision director said on Saturday.
"Our records show that 55% of the requests for euro and Turkish lira have come within two months after the lifting of the sanctions,” he said in comments posted on the bank's website.
Darabi emphasized that the CBI has no problem in providing Iranian traders in Asia and Europe with foreign exchange. “In the past people had to wait for long for hard currency. Now their requests are met within 72 hours.”
Referring to the release of Iran’s blocked assets across the world, the official said “These assets will help ease Iranian traders’ operations, giving them more space [since they do not need to worry about their forex needs].”
Direct banking relations with European banks are now less costly and will in turn reduce the price of imported goods, he said.
Earlier on March, the CBI governor, Valiollah Seif, announced Iran’s banking system has established relations with 264 foreign banks and 1,202 letters of credit were to Iranian individuals and firms since the lifting of the sanctions on January 16.
The Obama administrational also announced this week that it is considering easing financial restrictions that prohibit US dollars from being used in transactions with Iran. American officials told the Associated Press that the Treasury Department has prepared a general license permitting offshore financial institutions to access dollars for foreign currency trades in support of business with Iran. The practice, which is currently illegal, could be a significant boost to Iran doing business with the rest of the world.
Subsidized Forex Cap
In a separate development, Valiollah Afkhami, deputy minister of industry, mining and trade said the government plans to reduce the list of importers receiving US dollar at subsidized rates.
“The government might make some changes in allocating subsidized forex to importers of raw material and equipment, which I personally think should foster domestic production,” eqtesadnews.ir quoted him as saying on Saturday.
“Restrictions on allocating foreign currency at official rates will give domestic products a better chance to compete with subsidized imported foreign goods and help manufactures.”
Difficult economic conditions and the sanctions forced Iran to adopt a twin exchange rate regime in 2012 with the government providing official (subsidized) foreign exchange for the import of basic goods while the highly volatile parallel market rate catered to non-essential demand.
“However, no change has been implemented so far,” he added, noting that the CBI is the ultimate decision-making body when it comes to monetary and forex matters.
The CBI has often said it plans to unify foreign exchange rates by the second half of the fiscal year (started March 20) to prevent rampant rent-seeking and corruption in the currency market.
