Western banks cold-shoulder Iran trade finance scheme

Monday, 17 March 2014 00:00 - - {{hitsCtrl.values.hits}}

Iran wants economic sanctions lifted
Banks wary of falling foul of US regulations
Iran keen to speed up humanitarian trade plan

REUTERS: Despite a diplomatic thaw, Western banks are steering clear of attempts by Iran to get them involved in financing humanitarian transactions, fearing they could be penalised under US sanctions, bankers and government officials told Reuters.

Iran was never barred from buying food or other humanitarian goods under sanctions imposed because of its disputed nuclear programme, but measures by the European Union and the United States have made trade generally more difficult over the past two years by hindering payments and shipping. As part of talks in Geneva over the nuclear question, Tehran is pressing world powers to speed up trade finance arrangements on humanitarian deals involving both Western and Iranian banks, according to an Iranian Government document seen by Reuters and sources familiar with the initiative. Iranian Government officials and international trade sources say Tehran wants to simplify complex trade finance arrangements potentially worth billions of dollars, which would alleviate pressure on the country’s sanctioned banking system. According to a joint plan of action agreed in November in Geneva, world powers would “establish a financial channel to facilitate humanitarian trade for Iran’s domestic needs using Iranian oil revenues held abroad”. “This channel would involve specified foreign banks and non-designated Iranian banks to be defined when establishing the channel,” the action plan said. Iran, with its economy under severe pressure, is keen to push this process forward. “We have been informed that according to the negotiations and agreements done in Geneva, the possibility to exchange direct LCs (letters of credit) between seven European banks and eight Iranian banks for food, medication and humanitarian goods has been provided,” the Iranian government document seen by Reuters says, although it made clear this was not final. “Please note, that we can accept no legal liability regarding this information as it remains to be officially confirmed by the responsible authorities.” Big banks The US Treasury Department and EU officials declined to comment on specific banks. A US Treasury official said the United States is working with banks and governments in Asia and Europe to establish mechanisms for humanitarian trade with Iran, and multiple channels were ready for Iran to purchase humanitarian goods. A different US official told Reuters separately that Washington was having trouble persuading some big banks to work on the issue. Regulators in New York and Washington are looking at potential violations by France’s Credit Agricole and Societe Generale of US sanctions imposed against countries like Iran, a person familiar with the investigation said.