One of the biggest problems Iran has faced in the aftermath of the lifting of nuclear-related sanctions is its lack of access to the greenback, as dollar transactions would require the involvement of American banks. Tehran said this has also affected non-dollar business and trade dealings. Given that most international trade is conducted in US dollars, Iran has even experienced some issues with accessing its own foreign exchange reserves and revenues generated by oil sales. Referring to the latter, Central Bank of Iran (CBI) Governor Valiollah Seif told The Guardian May 20, “If we want to exchange Omani rials to euros, we don’t need dollars, but the system is designed in a way that it [Omani rial] has to be changed to dollars first, then euros. They should find a way for us to resolve this issue.”
After extended wrangling, the US government last month finally gave Iran limited access to dollars. On Oct. 7, the Treasury amended its Lifting of Sanctions Guidance (“Guidance”) by incorporating a series of new questions and answers (Q&A), including some directly relating to the lifting of financial and banking-related sanctions.
The revised Guidance allows for dollar dealings with Iran through foreign banking institutions — as long as those transactions do not enter the US financial system. The Treasury also did away with the outright ban on foreign transactions with Iranian companies that are likely run by individuals who are subject to US sanctions. The move came amid increasing criticism by Iranian officials that obstacles restricting trade with Iran are still in place despite the July 14, 2015, Joint Comprehensive Plan of Action (JCPOA).
The limited lifting of sanctions for Iran to trade in dollars came after several meetings between senior Iranian and US officials. For instance, on April 14, Seif met with US Treasury Secretary Jack Lew. Of note, on the same day, US House Speaker Paul Ryan expressed opposition to any move to give Iran access to the US dollar.
But what does this new Guidance refer to? Are foreign financial institutions — including financial subsidiaries of US companies acting outside the United States — now allowed to open accounts for Iranian natural and legal persons to conduct financial transactions in dollars? In the revised Q&A, two Iranian entities — the CBI and the National Iranian Oil Company — are referred to, and a question is included on whether trade with these two entities is allowed. The answer is “yes,” and it stipulates that foreign financial institutions and financial subsidiaries of US companies can open bank accounts for Iranians and provide them with services in dollars. It continues that this opportunity has been given to both Iranians and persons who reside in Iran, and also persons who are included in Executive Order 13599 and Section 560.211 of the Iranian Transactions and Sanctions Regulations. The answer continues that such transactions and accounts must not make American banks and financial institutions provide services to Iran, directly or indirectly, or block Iranian properties.
The Treasury’s revised Q&A also addresses transactions involving Iranian institutions and persons who have remained on the Specially Designed Nationals List. It states that persons and institutions on the list cannot benefit from the new dollar guidelines as they are subject to remaining US non-nuclear sanctions. Furthermore, another question addresses the issue of whether US financial institutions can open accounts for non-American financial institutions that have maintained their relationships with Iranian banks and financial institutions that are not on sanctions lists. In this respect, the Treasury Department’s answer is again “yes,” and it is stated that US financial institutions can have economic and trade relationships with non-American financial institutions that have kept their relationship with nonsanctioned Iranian institutions.
Needless to say, the greenback still plays a major role in international trade. Oil and gas transactions are particularly conducted in dollars. In this vein, there are still long-standing US sanctions in place that prohibit American, Asian and European banks from doing business with Iran in dollars. If Iran, for instance, wants to retrieve its oil sales to India in euros instead of rupees to buy European goods, this process first involves exchanging rupees for dollars and also dollars for euros. Another advantage of this new Guidance for Iran is that it can keep its foreign reserves in dollars.
Commenting on the US Treasury’s revised Guidance, CBI official Mohammad Ali Karimi told Al-Monitor, “The new Q&A clearly allows non-US financial institutions and banks to have correspondent banking relationships with US banks while they maintain their ties with the Iranian banks that are not subject to US sanctions. Nevertheless, it stipulates that earlier [previous] US sanctions remain and non-US banks cannot transfer money and assets through US banks on behalf of Iran.”
He added, “On the other hand, to prevent US banks from blocking Iran’s assets [according to Executive Order 13599 and earlier sanctions] necessary precautions should be taken so that Iranian funds and assets cannot be transferred through US banks. However, it matters that non-US banks can have trade with Iranian banks without the fear of losing relationships with US banks. That’s a good point that can reconnect the Iranian banking system with the world.”
The election of Donald Trump as the president of the United States has raised concerns about the future of the implementation of the nuclear deal. While campaigning, Trump declared that if elected, he would “rip up” the nuclear deal, while on the other hand, also stating that he would “police that contract so tough they [Iran] don’t have a chance.”
Although it is still unclear which exact approach Trump will adopt — let alone how and with the help of which mechanisms he wants to police the nuclear deal — it is hard to see a continuation of President Barack Obama’s efforts to fulfill US obligations under the landmark accord. Indeed, given the explicit opposition to the nuclear deal, one can expect future obstacles in the way of implementation of the deal. Thus, it can be expected that efforts to help cement the implementation of the JCPOA, such as the Treasury Department’s revised Guidance, will continue to be made in the coming months.