Bank takes center stage as Iran seeks nuclear deal that works


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By Golnar Motevalli

(Bloomberg) –

Iran is pushing for its banking sector to receive guaranteed and definitive sanctions relief in talks to restore the country’s nuclear deal with world powers.

“The lifting of sanctions against the central bank, Iranian banks, SWIFT, and any transfer of money between them and the main foreign correspondent banks, must be verified,” said Abdolnaser Hemmati, governor of the Central Bank of Iran. , in response to questions, referring to Iran’s restrictions on access to the Belgium-based global payments system.

Hemmati said central bank officials are directly involved in the talks to ensure that the removal of US sanctions is tangible. Negotiations resumed in Vienna on Friday in an attempt to reconstruct the 2015 agreement reached by Tehran and a group of six leading countries.

This deal was not enough to persuade European banks to work with Iran, even before the Trump administration abandoned it in 2018. Most of the sanctions imposed on the Islamic Republic’s atomic program have been lifted; but US sanctions related to other long-standing issues, such as Tehran’s ties to groups designated as terrorists by Washington, were not.

Global lenders feared breaching regulations and risking multi-million dollar fines, as banks in South Korea and the UK have seen at their expense. Iranian officials quickly complained that the residue of US sanctions was still hampering their ability to do banking with the world.

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‘In practice’

In February, Supreme Leader Ayatollah Ali Khamenei bluntly told diplomats across the country that they must avoid a similar trap this time around. US sanctions must be lifted “in practice, not just in words or on paper,” the 82-year-old cleric said.

“We’ll do the verification our way,” Hemmati said. “Personally, I am optimistic about the trend of negotiations.”

Iran says US sanctions have hampered its ability to import unsanctioned goods like food and medicine and to effectively manage the coronavirus outbreak. Washington has also obstructed Iran’s request for a $ 5 billion loan from the International Monetary Fund.

The Iranian banking system has for decades been largely isolated from global finance both due to sanctions and failure to meet international standards for combating money laundering and terrorist financing – what even the strategic partners of China and Russia have said is preventing them from working with its lenders as well.

In recent years, diehard conservatives have often opposed President Hassan Rouhani’s efforts to ensure Iranian banks adhere to the standards set by the Financial Action Task Force, a Paris-based watchdog.

Discontinued Offers

After the 2015 deal lifted a web of sanctions imposed by nations fearing Tehran would seek to develop nuclear weapons, thousands of Iranian companies secured lines of credit from domestic lenders for imports. French energy giant Total SA and German automaker Volkswagen AG were among the foreign companies to announce deals to inject money into the Islamic Republic.

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International banks, however, kept their distance, even those based in Europe, as the US sanctions also targeted non-US citizens who were working with circumscribed Iranian entities – so-called secondary sanctions.

Agreements with US companies that were technically cleared, such as plans to buy dozens of airliners from Boeing Co., have progressed or have been impossible to close.

The Trump administration imposed hundreds of other sanctions on Iranian lenders, including the central bank, as it stepped up pressure on Tehran. He often used terrorism designations to ensure that their outcome would be difficult and politically charged.

Roadblocks abroad

“When Iranian banks tried to open branches in other countries, they always found that they could not work easily at all,” said Massoud Gholampour, analyst at Tehran-based Novin Investment Bank. .

Pressure is also being exerted in Washington. On Thursday, Wall Street companies urged the Biden administration to ease the burden of complying with the wave of sanctions that Trump has imposed on his opponents, including Iran.

LexisNexis Risk Solutions estimates that financial institutions in the United States and Canada spent $ 42 billion in 2020 to comply with financial crime – which includes sanctions and anti-money laundering efforts.

Read more: Banks seek Biden’s help after Trump’s 1,000 sanctions a year pace

“The Obama administration has relied entirely on a global outreach program for banks and businesses to clarify the nature of sanctions relief and reassure them that it is possible to engage in compliant trade with Iran. », Declared Esfandyar Batmanghelidj, visiting researcher at the European Council on Foreign Relations.

These efforts “have failed” and diplomats must work on new tools to “provide the types of licenses and guidance businesses need to work confidently in post-sanctions environments,” he said.

© 2021 Bloomberg LP

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