Possibility of Iran breaking nuclear deal also a deterrent
More than half of global companies interested in doing business with Iran are holding back for fear of running afoul of sanctions that remain in place even after its nuclear deal with world powers, a new survey shows.
Fifty-eight of 100 executives of U.K.-based international firms said they aren’t confident they know what precautions need to be taken to protect their investments and avoid regulatory penalties, according to a report by global law firm Clyde & Co provided to Bloomberg.
Businesses are also hesitant to expose themselves to the risk of nuclear-related sanctions being reinstated if Iran violates the deal, which would “very likely” lead to a loss of money, the report said.
Nuclear-related sanctions, including a ban on the country’s use of the SWIFT system for international financial transactions, were lifted in January following the nuclear deal. Other international sanctions related to terrorism and ballistic-missile development remain in place, as does a U.S. ban on American commerce with Iran and restrictions on dollar-denominated trades related to Iran.
Keeping Mum
Some 30 percent of executives questioned said they were not comfortable discussing plans to enter Iran with their banks, according to the survey conducted by Clyde & Co at a seminar on Iran-related sanctions relief held in London in conjunction with the London Chamber of Commerce and Industry.
“If a third of the businesses looking to enter Iran are so worried about sanctions that they are fearful of discussing their plans with their own banks, then there is a problem,” said John Whittaker, a partner at Clyde & Co. “The high level of regulation involved is proving too arduous for most banks, coupled with concerns over handling Iran-related business.”
While European companies have been at the forefront of a race to enter a market of 80 million consumers, major EU banks are reluctant to provide the financing, after they or peers were slapped with fines incurred over commerce with the Islamic Republic. BNP Paribas SA agreed to pay a record $9 billion to the U.S. two years ago, in part for dealings with Iran. Commerzbank AG agreed to pay $1.45 billion in 2015 in connection with allegations it breached U.S. sanctions against countries including Iran. Credit Suisse settled an Iran probe for $536 million in 2009.
‘Huge Amount’
U.S. Secretary of State John Kerry has acknowledged banks “reluctance” to take risks and has urged them to seek guidance when in doubt. In a May 4 interview with Bloomberg, the State Department’s deputy lead coordinator of the nuclear agreement, Jarrett Blanc, said the U.S. has provided a “huge amount of information” to reassure banks and companies and is “in regular contact” with Iranian officials to ease concerns.
At the same time, the International Monetary Fund’s first deputy managing director, David Lipton, said in an interview in Tehran on Tuesday that Iran also needs to tackle issues in its banking system and bolster anti-money laundering and terrorism financing laws as part of its effort to reconnect to the global economy.
While a quarter of the respondents cited remaining U.S. sanctions as being their greatest concern, fears are also compounded by other existing penalties. Dozens of Iranian individuals and entities are blacklisted by the European Union, the U.K. and the U.S., leading to compliance challenges given the non-transparent nature of the Iranian business world.
“Exporters may unwittingly trade with a designated person or entity,” Whittaker said. “Thorough due diligence is the key which comes at a cost, so there has to be sufficient margin to make the trades viable.”
