Iran is gradually restoring banking links with the rest of the world by forging ties with smaller foreign institutions, even though large global banks are still holding back because of legal risks, Iranian officials and foreign bankers say.
Since international sanctions over Iran’s nuclear programme were lifted in January, the world’s big banks have continued to stay away because they fear being penalised by remaining U.S. sanctions over issues such as money laundering. This has slowed Iran’s efforts to rebuild its foreign trade and lure investment.
But in the last few weeks, the officials and bankers say, Tehran has begun making a dent in its financial isolation by forging banking channels via small institutions, many of which do little or no business in the United States and so feel less legally exposed when they engage with Iran.
“Two hundred small and medium-sized international banks have started correspondent relationships with Iranian banks,” Iran’s central bank said in an emailed response to questions by Reuters.
Two foreign commercial bankers in the Gulf, who declined to be named because of commercial sensitivities, said that number was roughly in line with their understanding of the scope of Iran’s banking links at present.
Under the nuclear sanctions, Iranian companies used methods such as transfers of funds through money changers and barter to conduct trade, which was expensive, time-consuming and sometimes unreliable. Normal banking channels make trade much easier by cutting costs and reducing risk.
The smaller banks cannot provide as much financing as the top global institutions and may offer a narrower range of services. But their activities appear to be supporting a gradual revival of trade between Iran and Europe.
European Union foreign policy chief Federica Mogherini said trade between the EU and Iran increased by 22 percent in the first four months this year – though that still leaves trade far below pre-sanctions levels. Two-way trade plunged 72 percent from 2011 to 7.7 billion euros ($8.6 billion) last year.
Giovanni Castellaneta, chairman of Italy’s export credit agency SACE, told Reuters that some small European banks without business ties to the United States had begun doing transactions with Iran to support trade.
Iranian banks are now opening accounts and letters of credit with foreign banks and conducting “currency transfers in the form of issuing payment orders for foreign exchange services and imports”, Iran’s central bank said.
It added that Iran’s main banking relationships had been formed with institutions in Asia and Europe, and to a lesser extent in the Americas and Africa.
Source: / Iran Daily /