Each and every day we read that Iran is hyperinflating or about to hyperinflate.
Members and other friends of BICC will be closely following the news and Iran's position on the JCPoA. The text of the agreement can be found at this link:
In its decision to exceed the enrichment limits listed in article 7 of the document, the Iranian government has cited the USA's unilateral withdrawal from the agreement and re-imposition of sanctions as a breach of article 26 of the agreement. IE Iran asserts that the US broke the agreement first.
The Iranian government has called on the E3 to fulfil their obligations which are listed at article 19 and to compensate for the USA's withdrawal.
Article 36, also cited by Iran , sets out the process by which E3 participants may trigger a challenge to Iran and conversely by which Iran can pursue a complaint against the E3.
We invite members and friends to look at those cited articles via the link above.
BICC greatly regrets the latest turn of events in UK-Iran relations. The British position has been to try to maintain trade with Iran despite US policies and the formation of Instex has been a major effort on HMG's part to facilitate that trade.
BICC has made consistent efforts to promote trade between the two countries consistent with the lifting of sanctions following implementation of JCPOA and with current British policy. Over the past 18 months we have made particular efforts to encourage humanitarian supplies from the UK to Iran.
The extension of the current tensions to British commercial interests in the region will make it even more difficult for UK companies to engage with Iran. BICC hopes that all sides will manage to find a speedy and satisfactory solution to the current serious difficulties.
BICC understands the Government and its European partners are working on three initiatives to support transactions with Iran and for this purpose, the E3 and Iran have formed a number of working groups.
The first initiative relates to consumer goods and would seek to enhance existing commercial banking relationships between Europe and Iran to maintain payment for consumer goods including food, medical and agricultural goods. The idea is to facilitate European banks processing payments of certain chosen identified Iranian banks. The Government is working with the US to get additional assurances for banks and bring some legal certainty into the situation. This would focus on the Iranian banks most active in consumer goods, are connected to SWIFT and have active correspondent banking relationships to Europe. All this would be done in accordance with regulatory standards particularly relating to AML and CFT.
The second initiative is a Special Purpose Vehicle (SPV), essentially a netting mechanism, which will reduce the number of cross-border payments by enabling businesses to settle debts and payments from Iran between themselves. This could be of particular use to Iran in getting paid for its oil.
The third initiative is a development of the second and is a larger SPV that will still be a netting mechanism but will have a banking licence to process payments itself. The SPV would eventually become a paying agent or bank, in which EU businesses could have an account, and it would have relationships with Iranian banks. It would be open to Non-EU companies as well and would be regulated and supervised. The UK is fully involved in these discussions, will be a participant and it is assumed will continue to be so even after the UK leaves the EU.
In June 2016, the FATF welcomed Iran's high-level political commitment to address its strategic AML/CFT deficiencies, and its decision to seek technical assistance in the implementation of the Action Plan. In light of Iran's demonstration of its political commitment and the relevant steps it has taken in line with its Action Plan, the FATF has decided to continue the suspension of counter-measures. The FATF will keep monitoring progress in the implementation of the Action Plan and consider next steps.
Iran will remain on the FATF Public Statement until the full Action Plan has been completed. Until Iran implements the measures required to address the deficiencies identified in the Action Plan, the FATF will remain concerned with the terrorist financing risk emanating from Iran and the threat this poses to the international financial system. The FATF, therefore, calls on its members and urges all jurisdictions to continue to advise their financial institutions to apply enhanced due diligence to business relationships and transactions with natural and legal persons from Iran, consistent with FATF Recommendation 19. The FATF urges Iran to fully address its AML/CFT deficiencies, in particular those related to terrorist financing.
The FATF will continue to engage with Iran and closely monitor its progress
The following is an excerpt from the recent Joint Communiqué of the G7 Foreign Ministers meeting in Lucca, Italy 10-11 April 2017:
"We support the Joint Comprehensive Plan of Action (JCPoA) as an important contribution to the non-proliferation regime. Continued and full implementation of the JCPoA is essential to build confidence that Iran's nuclear program is exclusively peaceful in nature. We value the JCPoA's comprehensive structure and the commitment by all parties to its solid verification mechanism. We commend and continue supporting the IAEA in its crucial work in Iran, including monitoring and verification to help ensure compliance with Iran's JCPoA commitments and safeguard obligations, thus playing a key role in fostering mutual trust. We stress the need for all parties to entirely and consistently fulfil all their commitments under the JCPoA in good faith.
"We reaffirm the need for Iran to strictly abide by all its nuclear related commitments. UN Security Council Resolution 2231 needs to be fully implemented, including its provisions prohibiting the transfer of arms. We deeply regret Iran's testing of ballistic missiles; as such tests are inconsistent with UN Security Council Resolution 2231.
"We call upon Iran to play a constructive regional role by contributing to efforts to achieve political solutions, reconciliation and peace in Syria, Iraq, and Yemen and other parts of the region and to cooperate in countering the spread of terrorism and violent extremism. We also call on Iran to comply with its international human rights obligations and in particular to ensure freedom of expression and to end arbitrary detentions and executions."
As at the end of October 2016, banking services for Iran trade transactions are not generally available in the UK. They are more so, but still limited in other EU countries and around the world. Some UK banks will undertake Iran business, others won't and would rather close the customer's account than do so. The banks that will, do so, confidentially, for their best long-term customers, usually transaction by transaction not on a treaty basis. This means that the banking system doesn't generally provide Iran trade finance services.
Those banks that won't provide banking services for trade with Iran also do what they can to inhibit the rest of the market from doing so, by implying that they would withdraw clearing or correspondent banking.
This leaves "unbanked" exporters for Iran to construct specific payment routes. These involve using the buyer suggested payment arrangements, if necessary, in combination with banks which will undertake banking services for Iran trade (usually the correspondents of Iranian banks, EIH and others) so that the UK exporter's payments are unknown to their UK bank. This involves risk to the exporter, of course. This may be happening as UK exports increased by about 30% in the first 6 months of 2016 by comparison with the similar period for the year before. This payment procedure happened under sanctions for allowable exports.
Something similar happens in Germany, Italy and other EU countries. Germany has a large number of small regional banks, many of whom are willing to provide payment services for Iran. These smaller banks are not constrained by the ability of the big German banks to hold the market to their own management policies on Iran. The Iranian banks in London could provide a route through this, if they weren't hamstrung by clearing and correspondent relationships in the UK.
The term of the market doesn't go beyond 360 days at present, although Iran is beginning to call for longer term credit.