Iranian financial institutions are back in the global banking business, now able to use the "worldwide transaction network SWIFT for moving money and letters of credit.
With the nuclear deal that led to the lifting of international sanctions, Iran suddenly has access to around 100 billion euros of its assets that were frozen in countries around the world.
And as of this week it is back in the global banking business, able to use the worldwide transaction network SWIFT, the Belgian based cooperative which handles cash transfers and letters of credit between financial institutions.
Mohsen Jalalpour, the head of Iran’s Chamber of Commerce, Industries, Mines and Agriculture, said: “Banks can now access SWIFT. We should note that our banks were subject to banking sanctions and needed to prepare the necessary infrastructure and they managed to do that by today.”
Re-engaging with the banking world through the Swift system is vital for Iran’s trade, particularly of crude oil.
A government spokesman said some of that 100 billion euros in formerly frozen assets will be brought back to Iran while the rest will used to purchase goods to be imported.
While international banks are expected to link up with their Iranian counterparts via SWIFT, Iran will also be looking to encourage foreign institutions to expand involvement in the country’s financial system.
However, foreign banks considering establishing a subsidiary in Iran will in most cases require a partnership with a local entity unless they set up in one of a handful of free zones, said Nicholas Gilani, senior partner at Arjan Capital, a consultancy advising on Iran business.
And for many foreign banks, there are concerns about being caught up in ongoing US sanctions.
Many international sanctions relating to Iran’s nuclear program were lifted but most involving U.S. measures remain in place. Non-US banks may trade with Iran without fear of punishment in the United States but U.S. banks may not do so, directly or indirectly.
Washington’s sanctions prevent U.S. nationals, banks and insurers from trading with Iran and also prohibit any trades with Iran in U.S. dollars from being processed via the U.S. financial system. This is a significant complication given the dollar’s role as the world’s main business currency.
European banks are also cautious – with some, including Deutsche Bank, remembering past fines from US regulators for breaking sanctions, though Commerzbank has said it is reviewing its policy of not doing business in Iran.
An Iranian central bank official said banks from European countries including Germany, France, Britain and Italy, had been in talks to open branches after the lifting of sanctions.
“God willing, soon we will witness that too. Iran is a very attractive market for business and they know that,” the official said.
Last month’s nuclear deal with world powers brought about the lifting of international sanctions after the United Nations verified that Iran had curbed its nuclear activities.