Iran will be off limits to banks for many years, while January’s deal could still fall apart, writes Brian Caplen.

The West’s policy on Iran is totally confusing and will not restart investment. For starters, the deal negotiated in January for sanctions on Iran to be lifted in return for the scaling back of nuclear activities still leaves many sanctions in place. Anyone doing business with companies related to Iran’s Revolutionary Guard Corsp (IRGC), for example, could still be breaking both US and EU sanctions. But with the IRGC embroiled in many economic activities in the country, how could a bank ever be sure its due diligence was correct?

Then there is the strange situation whereby many of the edicts prohibiting American banks from doing Iranian business are still in place, such as the treasury department’s listing of the Iranian financial sector as a money-laundering risk, as well as Financial Action Task Force (FATF) measures. 

This led to the farcical situation on May 12 when US secretary of state John Kerry met with European bankers to try to persuade them that they could safely do business with Iran even though American banks cannot. 

He has said previously: “There are now opportunities for foreign banks to do business with Iran… unfortunately, there seems to be some confusion among some foreign banks and we want to try to clarify that.”

Perhaps Mr Kerry has forgotten that US authorities have fined leading European banks such as HSBC, Standard Chartered and BNP Paribas billions of dollars for breaking sanctions against various countries, including Iran. 

Perhaps he has forgotten that even if the state department says Iran business is OK, it does not mean that the US's plethora of regulatory bodies and legal arms will necessarily go along with that view. 

Perhaps he has forgotten that he will not be in office in six months' time and that Donald Trump, if elected president, has promised to renegotiate the Iran deal. 

Small wonder that HSBC’s chief legal officer Stuart Levey, writing in the Wall Street Journal, says: “HSBC has no intention of doing any new business involving Iran. Governments can lift sanctions but the private sector is still responsible for managing its own risk and no doubt will be held accountable if it falls short.”

Then there is the no small matter that the American lobby group United Against Nuclear Iran, led by Mark Wallace, a former US ambassador to the UN, is trying to block the deal and discourage big companies from investing in Iran. 

Meanwhile, the Iranians are complaining that since the deal was agreed not much has changed and that financial transactions are as difficult as ever. With disillusionment in Tehran and a change of administration in Washington, there is every prospect the deal could unravel. 

Brian Caplen is the editor of The Banker.

Order The Banker July edition

FREE trial access to Top 1000 World Banks

Join our community

View from Sibos roundup

In concluding Sibos 2017 in Toronto, Brian Caplen and Joy Macknight talk about the hot topics at the conference: technology, Swift gpi, blockchain and greater collaboration.

The Banker on Twitter

By continuing to use this site you consent to the use of cookies on your device as described in our cookie policy unless you have disabled them. You can change your cookie settings at any time but parts of our site will not function correctly without them.