Iran’s economy minister has returned from the United States claiming triumphantly to have made progress in pushing Iran’s post-sanctions economic agenda, in particular by winning clarification from the US Treasury on how foreign companies can do trade deals in US dollars.
But though the clarification is important, there is still a long way to go before US sanctions stop hampering Iran’s reintegration into the world financial system.
The Barack Obama administration lifted some international sanctions in January, mainly on transactions between non-US entities doing business in Iran, after a landmark agreement to throttle Iran’s nuclear programme in 2015 was signed, closing the Islamic Republic’s path to future nuclear weapons. Since then Iran’s financial sector has sought to reconnect with the global financial system, but has hit roadblocks because of the US’s non-clarification on several issues in regards to banking in dollars.
Iranian officials have complained that many foreign business are still unwilling to make a move as the Joint Comprehensive Plan of Action’s (JCPOA) language was deemed vague and hinted at non-US business being sanctioned for doing trade in US dollars even if they avoided American banks.
Economy Minister Ali Tayyebnia met with International Monetary Fund (IMF) officials at the IMF/World Bank Annual Meetings in Washington on October 7 to discuss Iran’s reintegration into the global banking system, according to Tasnim News Agency. Tayyebnia also held talks on the expansion of bilateral economic times with counterparts from Sweden, France, Norway, Italy, China, Netherlands, and India on the sidelines of the Annual Meetings.
“During my meetings with European ministers, I pointed to the US’s lack of commitment to its obligations under the nuclear deal and highlighted the need for establishing banking relations,” he said.
Tayyebnia met Christine Lagarde, IMF president, who promised to launch consultations with US authorities to remove barriers on cooperation between global banking bodies and Iranian banks.
Tayebnia went on to stress: “We believe that unjust sanctions should not have become a basis for reduced or severed ties of World Bank and IMF with Iran. Now that the sanctions have been lifted, our natural expectation is to finally see the improvement of relations with these two organizations.”
During the meetings, the minister seemed to make some headway with regards to US dollar transactions outside of the US banking system. The US Treasury Department had meetings with the Iranian economic delegation whilst the minister was in the American capital, with the ministry agreeing to relax rules on foreigners doing dollar-denominated transactions with Iran.
The new rules, which immediately come in to effect, allow deals with Iranian entities that are not under sanctions, even if they are minority-owned or controlled by someone who is presently on the sanctions list.
“It is not necessarily sanctionable for a non-US person” to engage in deals with an entity not on the list, “but that is minority owned, or that is controlled in whole or in part, by an Iranian or Iran-related person on the [list],” the Treasury said in guidance for businesses updated on its website late on October 8.
The somewhat vague update to the regulations on conducting business with Iran is the third one the US Treasury has released to clarify the scope of sanctions in relations to Iran, but it doesn’t fully remove them.
The Treasury Department also stressed that the update doesn’t signify a change in the way business is conducted with Iran, and US-based business are still required to apply for sanctions relief permission before conducting discussions with Iran.
But one European businessperson based in Tehran, who asked not to be named, told bne IntelliNews the clarification was a definite improvement. “This minor change in the US’ sanctions language will be a major help to my clients who have hesitated to do business with Iran as they fear getting sanctioned,” he added “How much this will make a difference to my bottom line, remains to be seen … but I am hopeful.”