International

In Iran, Banks Tread Cautiously ... If At All

Iran and sanctions

The nuclear deal that is in place between Iran and a number of other nations does not have the teeth it might otherwise have to help – and key to that stymied effort is the fact that Iran remains largely isolated from interacting with the global financial system.

As noted by The Washington Post, there are a number of factors at play with the economic quarantine that has bedeviled the country even since the nuclear pact was struck just months ago. One key issue: banks have been balking at funding projects.

The stymied economic growth also finds root in continued sanctions, and the nation’s own jaundiced eye on foreign business entities, The Post noted, citing a number of scholars of the region and also U.S. officials with direct insight into Iran’s economic landscape.

There’s been a slow accumulation of business deals in Iran, but one key platform that would give torque – namely big banks from abroad coming from Asia and Europe to directly fund projects – has been lacking. The Post noted that both Washington and Tehran “blame each other” for the ennui. The Obama administration says that the sabre rattling from the country, in the form of ballistic missile tests and especially jailing of foreign businessmen, hardly stimulates investor confidence.

Conversely, Iran has said that the United States in particular has told banks to steer clear of deals that may violate sanctions. No less an eminence grise than Secretary of State John Kerry said this week that Iran is essentially “open for business” but that it is up to the Islamic republic itself to foster business development.

Rules that hamper development include mandates that state that foreign banks financing projects in Iran must actually prove that no Americans were involved in that financing. U.S. officials have noted that Iran tends to score quite low on surveys that rank hospitable business climes.

One key tell on the worldview of Iran: The Post noted that the Financial Action Task Force, which tracks compliance with money laundering and terrorism financing, has said that “special attention” must be paid to Iran in these respects.

Only North Korea has had similar caveats.

The caution stems in part from the Revolutionary Guard Corps., which controls large swathes of the Iranian economy. The group also has been known to fund terrorist operations and is in control of Iran’s missile operations. Thus a battle is shaping up between an old guard (literally) and business interests that would like entry into the country but remain daunted.

The U.S. presidential election may also be a fly in the ointment, as the incoming president may bring back nuclear sanctions. In the past, The Post noted, financial firms have been fined billions of dollars for sanction violations – and so now the overarching mindset is to take a wait and see approach.

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The September 2020 Leveraging The Digital Banking Shift Study, PYMNTS examines consumers’ growing use of online and mobile tools to open and manage accounts as well as the factors that are paramount in building and maintaining trust in the current economic environment. The report is based on a survey of nearly 2,200 account-holding U.S. consumers.

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