News

Western Sanctions on Iranian Banks Make Trade Harder

A currency exchange bureau worker counts US dollars, as Iranian bank notes are seen at right with portrait of late revolutionary founder Ayatollah Khomeini, in downtown Tehran, December 21, 2011.
A currency exchange bureau worker counts US dollars, as Iranian bank notes are seen at right with portrait of late revolutionary founder Ayatollah Khomeini, in downtown Tehran, December 21, 2011.

The European Union's expulsion of 30 sanctioned Iranian banks from a global financial messaging service last month has made it significantly harder for Iranians using those banks to do business with foreign partners.

The head of the German-Iranian Chamber of Commerce in Hamburg, Michael Tockuss, said that hundreds of German exporters are owed $4.7 billion by Iranians who received goods before the EU move, but now cannot use their banks to pay for them.

His comments reflect Western contentions that a variety of mostly U.S. and European sanctions relating to Iran's controversial nuclear program are having crippling effects on the Iranian economy.

The Belgium-based organization SWIFT disconnected 30 Iranian banks from its network on March 17, on the orders of EU nations who sanctioned those banks for having links to Iran's nuclear program.  The United States also has sanctions against 23 Iranian banks.

SWIFT is the world's dominant platform for cross-border financial transactions.  Without access to it, EU-sanctioned Iranian banks cannot send money abroad electronically on behalf of clients or themselves.

Money transfers cut

The SWIFT cut-off not only is blocking existing deals between Iranian and European companies, but also prevents them from making any new agreements to transfer money via the 30 Iranian banks.

Several opportunities exist for Iranian businesses and their trade partners to continue legal transactions with each other.

Tockuss said Iran has five or six banks that are not under EU sanctions.  Those banks remain connected to the SWIFT system and can be used by European companies exporting to Iranian markets.

But using that method is not easy, because many European banks refuse to accept money from any Iranian lenders, even those not under sanctions.

"This has nothing to do with the sanctions directly," said Tockuss. "It is a company decision to stop this business [with Iran]."

Many European banks also lack established relationships with the non-sanctioned Iranian banks, which are private, relatively young and have only a small market share.

Karim Pakravan, a finance professor at DePaul University of Chicago, said that any foreign banks opening accounts for Iran's small lenders are likely to limit their credit lines and charge them a premium for services.

"Pretty much the only way that Iranian banks can execute foreign transactions now is by allowing [Iranians] to buy cash, put it in a case, fly on a plane to wherever they have to go, and hand over the cash for whatever transaction they have," he said.

Cash transactions rise

Tockuss of the German-Iranian Chamber of Commerce said cash handovers by Iranians to European businesses "definitely have increased."  But he said in most cases the payments do not exceed $60,000.

"I have not seen any Iranians traveling in the world with half a million euros at the moment," he said.  "But smaller payments for spare parts or similar items are quite common."

Another legal avenue for Iran to engage in financial transactions with the West is by importing goods and services exempted from Western sanctions.

Items exempted by the Obama administration include food, medicine and communication equipment designed to help Iranians get better access to the Internet.

Even with such exemptions, Tockuss said the tightening of EU and U.S. sanctions on Iran has created another casualty: "the average Iranian on the street."

Tockuss said a German medical company that exports devices used by thousands of dialysis patients in Tehran recently had problems in finding a bank to handle Iranian payments.  He said the problems were eventually resolved.

Wide impacts

Pakravan of DePaul University said Western sanctions on Iran's banking sector have had other economic impacts.

"Factories cannot find raw materials and spare parts, and have stopped operating," he said.  "The Iranian market also has been invaded by much cheaper Chinese goods and those will continue to undercut Iranian industry."

Iranian Foreign Minister Ali Akbar Salehi has downplayed the sanctions.  In an interview with state news agency IRNA published on Monday, he called them "minor problems" and said "Iran is quite capable of defeating those pressures."

The Iranian government gets most of its revenue from oil and has signed barter agreements with major buyers such as India, bypassing the need to use the SWIFT financial messaging service.

Economist Intelligence Unit Middle East/North Africa editor Edward Bell, reached by phone in London, said the expulsion of Iranian banks from SWIFT "will not really affect Iran's oil sector much."

But Iran's government could see its fortunes decline if U.S. lawmakers succeed in passing a bill threatening SWIFT with penalties unless it expels all Iranian banks.  "If that happens, anybody trying to do any trade with Iran is going to face a real difficulty," Bell said.

Bell also said EU sanctions against Iran are likely to tighten even further.  "I think you will see a more coordinated and consistent EU policy on Iran as being more tough and similar to the United States," he said.

Join the conversation on our social journalism site -
Middle East Voices
. Follow our Middle East reports on
Twitter and discuss them on our Facebook page.

Michael Lipin

Michael covers international news for VOA on the web, radio and TV, specializing in the Middle East and East Asia Pacific. Follow him on Twitter @Michael_Lipin
This forum has been closed.
Comment Sorting
Comments
     
by: Jacques
April 08, 2012 12:31 PM
I bet that with all those sanctions stemming from way back in 1979 it will not be hard for the president to convince himself that for the good of the Iran the Iranians to his knowledge have secretely contracted Israel to scuttle the reactor the NY times claims must be dimantled.

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
3D Printer Makes Replica of Iconic Sports Cari
|| 0:00:00
...    
🔇
X
George Putic
May 27, 2015 9:31 PM
Cars with parts made by 3D printers are already on the road, but engineers are still learning about this new technology. While testing the possibility of printing an entire car, researchers at the U.S. Department of Energy recently created an electric-powered replica of an iconic sports roadster. VOA’s George Putic has more.
Video

Video 3D Printer Makes Replica of Iconic Sports Car

Cars with parts made by 3D printers are already on the road, but engineers are still learning about this new technology. While testing the possibility of printing an entire car, researchers at the U.S. Department of Energy recently created an electric-powered replica of an iconic sports roadster. VOA’s George Putic has more.
Video

Video US Voters Seek Answers From Presidential Candidates on IS Gains

The growth of the Islamic State militant group in Iraq and Syria comes as the 2016 U.S. presidential campaign kicks off in the Midwest state of Iowa.   As VOA’s Kane Farabaugh reports, voters want to know how the candidates would handle recent militant gains in the Middle East.
Video

Video A Small Oasis on Kabul's Outskirts Provides Relief From Security Tensions

When people in Kabul want to get away from the city and relax, many choose Qargha Lake, a small resort on the outskirts of Kabul. Ayesha Tanzeem visited and talked with people about the precious oasis.
Video

Video Film Festival Looks at Indigenous Peoples, Culture Conflict

A recent Los Angeles film festival highlighted the plight of people caught between two cultures. Mike O'Sullivan has more on the the Garifuna International Film Festival, a Los Angeles forum created by a woman from Central America who wants the world to know more about her culture.
Video

Video Kenyans Lament Losing Sons to al-Shabab

There is agony, fear and lost hope in the Kenyan town of Isiolo, a key target of a new al-Shabab recruitment drive. VOA's Mohammed Yusuf visits Isiolo to speak with families and at least one man who says he was a recruiter.
Video

Video Scientists Say Plankton More Important Than Previously Thought

Tiny ocean creatures called plankton are mostly thought of as food for whales and other large marine animals, but a four-year global study discovered, among other things, that plankton are a major source of oxygen on our planet. VOA’s George Putic reports.
Video

Video US-led Coalition Gives Some Weapons to Iraqi Troops

In a video released Tuesday from the Iraqi Ministry of Defense, Iraqi forces and U.S.-led coalition troops survey a cache of weapons supplied to help Iraq liberate Mosul from Islamic State group. According to a statement provided with the video, the ministry and the U.S.-led coaltion troops have started ''supplying the 16th army division with medium and light weapons in preparation to liberate Mosul and nearby areas from Da'esh (Arabic acronym for Islamic State group).''
Video

Video Amnesty International: 'Overwhelming Evidence' of War Crimes in Ukraine

Human rights group Amnesty International says there is overwhelming evidence of ongoing war crimes in Ukraine, despite a tentative cease-fire with pro-Russian rebels. Researchers interviewed more than 30 prisoners from both sides of the conflict and all but one said they were tortured. Henry Ridgwell reports for VOA from London.
Video

Video Washington Parade Honors Those Killed Serving in US Military

Every year, on the last Monday in the month of May, millions of Americans honor the memories of those killed while serving in the armed forces. Memorial Day is a tradition that dates back to the 19th Century. While many people celebrate the federal holiday with a barbecue and a day off from work, for those who’ve served in the military, it’s a special day to remember those who made the ultimate sacrifice. Arash Arabasadi reports for VOA from Washington.
Video

Video Kenya’s Capital Sees Rise in Shisha Parlors

In Kenya, the smoking of shisha, a type of flavored tobacco, is the latest craze. Patrons are flocking to shisha parlors to smoke and socialize. But the practice can be addictive and harmful, though many dabblers may not realize the dangers, according to a new review. Lenny Ruvaga has more on the story for VOA from Nairobi, Kenya.
Video

Video Rolling Thunder Run Reveals Changed Attitudes Towards Vietnam War

For many US war veterans, the Memorial Day holiday is an opportunity to look back at a divisive conflict in the nation’s history and to remember those who did not make it home.
Video

Video Female American Soldiers: Healing Through Filmmaking

According to the United States Defense Department, there are more than 200-thousand women serving in the U.S. Armed Forces.  Like their male counterparts, females have experiences that can be very traumatic.  VOA's Bernard Shusman tells us about a program that is helping some American women in the military heal through filmmaking.

VOA Blogs