|By Arabian Post Staff| The much-expected boom for trade hubs like Dubai from the opening up of Iran market has not materialised yet, as traders still face several impediments to doing business with that country.
While it is true that global majors have announced a series of major deals with Teheran, investors are showing continued reluctance to enter Iran due to the impact of the US sanctions on Iranian trade and investment following the implementation of the Joint Comprehensive Plan of Action (JCPOA) in January 2016.
Dubai traders, who traditionally have had strong links with the Iranian markets, are yet to re-establish a strong foothold as there still face issues with financial transactions.
“Despite the implementation of the deal in January 2016, many foreign investors remain hesitant to move into the Iranian market since the necessary banking channels to facilitate payments are yet to be formally put in place,”says Azadeh Meskarian, Solicitor at Zaiwalla & Co’s Iran Desk.
London-based Zaiwalla & Co. handled cases for clients such as Iran’s Bank Mellat in addition to advising international firms looking to enter the Iranian market.
Although all financial and banking sanctions imposed on Iran as a result of its non-proliferation activities have been annulled, many banks remain hesitant to officially return to the Iranian market, she points out.
The remaining US primary sanctions and restrictions prohibiting any Iranian person or entity from conducting a transaction in US dollar as well as settlement agreements between the relevant banks and the US authorities by which many banks including HSBC, Standard Chartered and BNP Paribas were fined as a result of evading the sanctions for providing services to Iranian individuals and entities, remain a strong deterring factor in this respect.
“It is understood that the settlement agreements and deferred prosecutions include terms prohibiting some of these banks and institutions from growing their Iran business or returning to the Iranian market for a certain period of time,” Meskarian says. HSBC was slapped a fine of $1.9 billion and Standard Chartered $327 million and while BNP Paribas has been burdened with $8.9 billion in penalties.
According to the solicitor, the heavy fines are a strong discouraging element, keep banks vigilant from potential actions they could face for re-establishing channels with Iran.
“Pursuant to the terms of the JCPOA, the parties made a commitment to take adequate administrative and regulatory measures to ensure clarity and effectiveness of the lifting of the sanctions, and it is therefore essential for the necessary financial channels to be re-established for trade relationships to substantiate,” she points out.
Although there has been some positive steps taken by smaller banks and financial institutions, the larger banks remain cautious about the US primary sanctions as well as potential serious consequences they could face for attempting to re-engage with Iran.