Employing ‘U-Turn’ secures JCPOA implementation

April 22, 2016

Three months after the implementation of the Joint Comprehensive Plan of Action (JCPOA) - the nuclear agreement signed between Iran and P5+1 in mid-January, President Hassan Rouhani’s administration could eventually persuade its dubious critics that Iran is reconnected to the Society for Worldwide Interbank Financial Telecommunication (SWIFT).

By Haniyeh Sadat Jafariyeh

However, the gate to international trade is not opened to Iranians yet due to some reasons, the fact that has beclouded the business perspective of Iranian tradesmen for some major reasons.

First of all, Iranian businessmen cannot make SWIFT transactions by themselves yet. As the Central Bank of Iran’s director general for international affairs Hossein Yaqoubi says, “The applicant businessmen should register their orders in bank branches that offer foreign exchange services and ask for opening credit lines.” According to him, the story of making brokerage relations and opening credit lines is totally different from that of getting relinked to SWIFT and the issues should not be got mistaken for one another. Besides, this can also be explained via Iranians’ unfamiliarity with new SWIFT rules, because it has been around four years since the European sanctions were levied against Iran’s financial transactions and left Iranian tradesmen in exile. So, they should start new brokerage relations and regain their reputation in international business environment.

Moreover, dollar-based SWIFT transactions are still inaccessible due to the U.S.-led sanctions imposed on Iran in early 1980s for issues other than the country’s nuclear program and the fiscal exchanges are presently done via other currencies.

Abbas Araqchi, who is the head of Iran Foreign Ministry's committee for following up on the implementation of the JCPOA, says “the legacy of primary sanctions still impacts our economy and impedes us from doing trade in dollar, the factor that significantly decreases Iran’s leverage in economic terms.”

On April 14, U.S. House Speaker Paul Ryan said he opposed any effort to give Iran access to the U.S. dollar, citing concerns about what Tehran would do with any financial access gained in the wake of the Iran nuclear deal, Reuters reported. "This is one of the reasons I adamantly oppose any steps this administration may take to give Iran access to the dollar," he said at a press conference.

Furthermore, as of the removal of sanctions against Iran, several foreign banks are craving for the renewal of their relations with Iran to benefit from the country’s bonanza in the near future. However, they are startled to cooperate with Iran for the reason of the billion-dollar fines that U.S. regulators had frequently imposed on them for circumventing anti-Iranian sanctions in past years. For example, France bank BNP Paribas agreed to pay $8.9 billion in July 2014 for violating U.S. sanctions against Sudan, Cuba and Iran. As a result, while brokerage relations are the prerequisites to opening LCs and making SWIFT transactions, such interbank ties are strictly confined due to obstructive measures of the U.S. which make the process of sanctions removal as well as Iran’s reconnecting to global financial system sluggish.

As Reuters reported on April 3, “there is growing political pressure on European banks to support corporate clients seeking to do business in Iran.” For example, in February, British Prime Minister David Cameron wrote to Barclays and required the bank to explain its refusal to handle a payment on behalf of Molyslip Atlantic, a British lubricant maker arranging sales in Iran. “The policy of Barclays Bank is in direct opposition to the policy of the EU and UN, as well as in opposition to the policy of the UK government,” Cameron wrote in a letter first reported by the Times. Barclays Chief Executive Jes Staley, wrote in his reply to the prime minister: “As we offer banking services through our U.S. operations we are required to continue to restrict business activity with Iran.”

Another example for the U.S. dominance on international financial and trade relations with Iran after the implementation of JCPOA was reported by the Japan Times when it wrote on March 16, “Japanese firms are still taking a wait-and-see approach because U.S. restrictions remain against financing businesses in Iran.” “Even though Washington lifted sanctions on non-U.S. banks, experts say banks will still face challenges in financing big projects unless the U.S. lifts sanctions entirely.”

While Obama administration officials have repeatedly said they aren’t blocking access to Iran’s overseas deposits, what the U.S. authorities are doing towards Iranian business and trade seems an implicit breach and a distraction from the direct text of the accorded nuclear deal which permits:

> Transfers of funds between EU persons and entities, including financial institutions, and Iranian persons and entities, including financial institutions;

> Banking activities, including the establishment of new correspondent banking relationships and the opening of new branches and subsidiaries of Iranian banks in the territories of EU member states;

> Supply of specialized financial messaging services, including SWIFT, for persons and entities including the Central Bank of Iran and Iranian financial institutions;

> Financial support for trade with Iran (export credit, guarantees or insurance);

> Commitments for grants, financial assistance and concessional loans to the Government of Iran; and,

> Transactions in public or public-guaranteed bonds.

U.S. officials, including Treasury Secretary Jack Lew — with whom Central Bank of Iran Governor Valiollah Seif met on April 14 — have ruled out reinstituting the U-turn (transactions that must be cleared through a U.S. financial institution even though the money does not stay in the U.S. bank) for Iran even though the procedure was allowed from 1995, when the United States ended direct banking relations with Iran and imposed a wide trade embargo, until 2008.

Seif, addressing the Council on Foreign Relations in Washington on April 15, called for “effective implementation of the agreement in such a way that Iran’s economic and business activities will be facilitated.” This includes the U-turn, as well.

Seif clarified that the JCPOA was predicated on the lifting of all nuclear-related sanctions and that in Iran’s opinion, the U-turn waiver was included, Al-Monitor wrote.

In practice, no specific step has been taken by U.S. officials to ease Iran’s financial transactions yet and the Asian country’s economic transactions are under the high impact of political issues. In case the circumstances remain unchanged, JCPOA may be jeopardized.

Leave a Comment

6 + 2 =