Iran seeks alternatives to dollar for transactions as bank hurdles still persist

Tehran, Feb. 28, IRNA - The' Implementation Day' for the Joint Comprehensive Plan Of Action (JCPOA) was declared on Jan. 16. More than a month has passed and the circumstances around the removal of the sanctions still remain murky.

Iran loaded its first cargo of oil to Europe since 2012 this month onto a tanker chartered by French TOTAL SA.

Most of the Western banks are shying away from doing business with Iran fearing it might endanger their commerce with the US. Greek refiner Hellenic struggled to find banks for payments, a sign that the Islamic Republic is still having difficulty regaining markets since the removal of sanctions.

Hellenic owes NIOC $800m for past deliveries of crude, reported Shana. Hellenic agreed last month to resume purchases immediately and start paying debt arrears.

Banks are being 'super cautious because they do want to have access to the US markets and the US rules as to what they can do aren't particularly clear,' said Ross Denton, a partner at Baker & McKenzie LLP specializing in sanction.

As a result, for the time being the Islamic Republic has adopted some counter measures for ensuring its return to the international markets.

Iran has extensive experience in barter trade, as a way of performing commerce without the use of the US dollar. One example is NIOC is offering to swap exports of crude cargoes for imports of refined fuel.

Barter deals avoid the need to access bank finance. NIOC is asking for at least partial cash payment for most refined-product trades and accepting transactions in Euros and other currencies. It is offering products such as fuel oil in exchange for imports of gasoline and is also willing to swap crude for fuel.

National Iranian Tanker Company (NITC), which operates the world's biggest fleet of supertankers, can offer its ships for charter on the international market again, commercial director Nasrollah Sardashti said in an interview on the sidelines of the Marine Money conference in Hamburg.

However, such business transactions are still waiting to take off.

The silver lining is the news of the first Iranian container ship transporting petrochemicals, following years of brutal sanctions, has started its journey towards the European ports in the past days and it is expected to dock at two European ports in the following days, Islamic Republic of Iran Shipping Lines (IRISL) head Mohammad Saidi told reporters on the sidelines of an Iran-Singapore trade conference at the IRISL head office on Sunday.

'Fortunately, following the removal of sanctions and the implementation of the JCPOA in the past five months, the IRSL has managed to take appropriate measures to reestablish shipping lines with Europe,' he said.

Another way to enter the markets is for Iran to trade in currencies other than the US Greenback. In fact NIOC has said that it prefers to receive its oil payments and debt repayments in euros, an official at NIOC was quoted as saying by IRNA.

The restart of Bank of Tokyo-Mitsubishi's ( BTMU) Iran oil transactions would give Japanese refiners the option to pay in the Japanese yen or euros, depending on the preferences of refiners or NIOC, announced Trend News Agency early Feb.

BTMU handled most of Japan's payments for Iranian oil prior to the mid-2012 sanctions.

Japan's crude imports from Iran plummeted to an average of 170,360 b/d in 2015, compared with an average of 313,480 b/d in 2011.

Meanwhile, Pakistan central bank cleared commercial banks and financial institutions for business with Iran last week, reports Reuters.

Trade between Pakistan and Iran fell to $431.76 million in 2010-11 from $1.32 billion in 2008-09, according to the Trade Development Authority of Pakistan.

But tightening of sanctions on Iran made smuggling, particularly of petroleum products, extremely lucrative.

Major Pak exports to Iran include Basmati rice, plastics, paper and oranges, and the big imports include lPG, petroleum products, electric transformers and dry fruits.

The bottom line: more than a month has passed since the 'Implementation Day' yet sanctions still persist and the situation for many Western companies remain cloudy. On the one hand they want to do business with Iran and on the other they are scared of wrath it might bring to them from US.

One more concern that cannot be ignored or forgotten. Many of these Western businessmen coming for business to Iran will require a visa to enter US to do their business due to the new visa waiver law.

So as one might think that the West has opened door for Iran, in reality most doors remain closed today and the Islamic Republic still has to find alternative way to do business with the external world.