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Exclusive: Global traders halt new Iran food deals as U.S. sanctions bite - sources

Exclusive: Global traders halt new Iran food deals as U.S. sanctions bite - sources
FILE PHOTO: A gas flare on an oil production platform in the Soroush oil fields is seen alongside an Iranian flag in the Persian Gulf, Iran, July 25, 2005. REUTERS/Raheb Homavandi/File Photo -
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Raheb Homavandi(Reuters)
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By Jonathan Saul and Parisa Hafezi

LONDON/DUBAI (Reuters) - Cargill, Bunge and other global traders have halted food supply deals with Iran because new U.S. sanctions have paralysed banking systems required to secure payments, industry and Iranian government sources say.

Food, medicine and other humanitarian supplies are exempt from sanctions Washington reimposed this year after U.S. President Donald Trump said in May he was walking away from a 2015 international deal over Iran's nuclear programme.

But the U.S. measures targeting everything from oil sales to shipping and financial activities have deterred many foreign banks from all Iranian business, including humanitarian deals. Many smaller banks that had dealt with Iran under a previous round of sanctions have also stopped dealings this time.

"There is no real chance of being paid using the existing mechanisms and many international traders are unable to do new business for the moment," said one European source with knowledge of the situation, who declined to be identified.

Western and Iranian trade sources said U.S. groups Cargill [CARG.UL] and Bunge <BG.N>, as well as Singapore's Olam <OLAM.SI>, were among those which could not conclude new export deals for wheat, corn, raw sugar or other commodities because Western banks would not process payments with Iran.

Cargill, Bunge and Olam all declined to comment when contacted by Reuters.

U.S. sanctions took full effect on Nov. 5 after a winding-down period, although Washington has issued temporary waivers for some of its allies which depend on imported Iranian oil.

CLOSING DOWN CHANNELS

Iran, which relies heavily on imported food staples, has years of experience working around U.S and other Western sanctions, which were progressively tightened between 2012 and 2015 until Iran reached a deal over its nuclear programme. Many sanctions were lifted in 2016 after the pact.

Under the earlier round of sanctions, Iran had turned to a dwindling number of foreign banks that continued to act as a conduit for payments to keep food and other trade flowing.

But this time round, many of those foreign banking channels are closing down. Three Iranian officials told Reuters that banking issues were to blame for halting food and other trade.

An official with Iranian Industry, Mines and Trade Industry said only a "handful of small European banks" with no or little interaction with the United States were still doing business with Iran, and they were only involved in small-scale purchases.

"We are in talks with Europeans to expand this network of banks and financial institutions," the ministry official said.

"But right now, many companies including Cargill and Bunge have informed us about (banking) difficulties that will force them to stop their dealings with Iran," he said.

Swiss lender Banque de Commerce et de Placements (BCP), one of those banks that had been involved in humanitarian-related dealings in the past, said in May it was suspending all new business with Iran.

Washington blacklisted Germany-based Europaeisch-Iranische Handelsbank AG (EIH) in November, shutting out an institution that financial sources said had been involved in limited business with Iran between 2012 and 2016.

EIH did not respond to requests for comment.

Several Western banks that had started business with Iran since 2016 have reversed course. Austria's Oberbank <OBER.VI>, one of the first European banks to reach a deal on new business with Iran, said in June it was stopping.

Other banks have followed suit, including Denmark's Danske Bank <DANSKE.CO> and Germany's DZ Bank.

Belgium's KBC <KBC.BR> said in June it would limit Iran-related transactions to humanitarian trade.

The bank did not say if it was still processing such payments when asked by Reuters in December, but said it "reviews its policy on a regular basis in full respect of all relevant regulations".

Dutch bank ABN AMRO <ABNd.AS> said it had facilitated transactions related to food, healthcare, medical equipment and agriculture to a limited extent and with specific clients. But it also told Reuters "the recent restrictive measures on Iranian banks do pose challenges."

CAUTION

For many foreign banks, it is easier to end any Iranian activity than try to navigate the U.S. sanctions rulebook and run the risk of slipping up and facing penalties, bankers said.

"There is super caution now," said a European financial source involved in Iranian transactions in the past, saying rules on food and other humanitarian dealings were complex.

"If goods are shipped for instance to an Iranian distributor, who then sells them on and not directly to an end buyer, banks will increasingly look at such a transaction as commercial rather than humanitarian," the source said.

A U.S. Treasury spokesperson said Washington offered broad authorisations and exceptions under sanctions that enabled sales of agricultural commodities, food, medicine and medical devices to Iran by U.S. and non-U.S. citizens.

U.S. Treasury Secretary Steven Mnuchin said in November the Belgium-based SWIFT financial messaging service could be used for humanitarian deals, but added: "Banks must be very careful that these are not disguised transactions or they could be subject to certain sanctions."

The European Union, a signatory to the nuclear pact and which urged Washington not to walk away, said its efforts to set up a mechanism to facilitate trade and circumvent U.S. sanctions could be in place by the end of the year.

EU diplomats have said the mechanism could focus on humanitarian items rather than the oil trade.

Switzerland is also working on a humanitarian payment channel, but no timeframe has been given.

However, banks remain cautious.

"Even deals that were already concluded earlier this year are affected and vessels carrying goods can't discharge as payments can't be processed or take a long time to clear," said another European source with trading activities in Iran.

Data on Dec. 21 from global shipping intelligence platform MarineTraffic showed 16 ships had been waiting to unload cargoes of commodities and goods, including foodstuffs, for at least two weeks at Iran's ports of Bandar Abbas and Bandar Imam Khomeini. Four of the 16 vessels had been waiting since October.

Washington says its sanctions are part of an effort to force Iran to curb its nuclear and missile programmes, as well as end Tehran's support for proxy forces in Yemen, Syria, Lebanon and other parts of the Middle East.

Iran insists its nuclear programme is only for peaceful purposes and its missiles are defensive. It also blames what it calls U.S. meddling for turmoil in the Middle East.

(Additional reporting by Michael Hogan in Hamburg, Nigel Hunt in London, Tom Polansek in Chicago and Hugh Bronstein in Buenos Aires; Editing by Veronica Brown and Edmund Blair)

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