By Barbara Slavin
ZURICH – Frustration was palpable at a conference this week in Switzerland on European business with Iran.
The continued hangover of United States sanctions that prevent Iranian access to the U.S. financial system — and bankers’ fear of punitive new fines — are inhibiting the mega deals that many Iranians and Europeans anticipated would follow implementation of a landmark nuclear deal.
Forced during years of sanctions to buy goods and services mostly from China and India, which were allowed to continue to purchase limited amounts of Iranian oil, Iran wants to convert billions of dollars worth of local currencies piled up in Asian banks to euros to buy Airbus planes and high quality industrial goods from companies such as Siemens.
But because such conversions typically use the dollar as a reference point, it has been extremely difficult for Iran to execute these kinds of transactions.
“Unfortunately you cannot do that directly [convert rupees into euros],” lawyer George Kleinfeld, of the Washington law firm Clifford Chance, said in an interview on the sidelines of the conference. “There is only one currency in the world that is so liquid that all other currencies are convertible into it and that’s the U.S. dollar.”
The Barack Obama administration says it is trying to help Iran find workarounds that will permit it easier access to its nominally unfrozen funds in Asian banks. U.S. officials have also told big European banks that it is no longer prohibited for them to return to the Iranian market, but according to Kleinfeld, there is still “a primal fear” of Iran among bankers that is the product of what he called “years of hyperactive enforcement” of U.S. sanctions.
While so-called secondary sanctions inhibiting non-U.S. trade with Iran have been lifted, Iran remains the target of primary U.S. sanctions because it is on a State Department list of terrorist-sponsoring states, mostly for support of anti-Israeli groups. Iran also faces continued U.S. and European sanctions for its record on human rights and U.S. sanctions because of ballistic missile tests.
Jarrett Blanc, the deputy lead coordinator for implementation of what is known as the Joint Comprehensive Plan of Action (JCPOA), told the Zurich conference that the United States would “live up to both the letter and the spirit of its commitments.” But he acknowledged that the U.S. government cannot order banks to undertake transactions that they view as potentially risky.
Some Iranians think their problems are part of a U.S. conspiracy to deprive them of what they were promised for accepting stringent curbs on their nuclear program.
At the conference, numerous Iranian business people came up to this reporter and complained about a recent U.S. Supreme Court ruling clearing the way for the seizure of $2 billion in Iranian assets in the United States to compensate relatives of U.S. victims of alleged Iran-backed terrorism in the Middle East.
While the case has nothing to do with the JCPOA, the timing of the judgment added to the perception in Iran that Washington is trying to prevent Iran from receiving economic benefits because of U.S. anger at other Iranian policies.
Iran is making strides despite the banking problems and says its oil exports have nearly recovered to pre-sanctions’ levels. The International Monetary Fund expects Iran’s economy to grow by four-to-five percent this year after years of recession and stagnation. But the focus at the Zurich conference was on ways to bolster Iran’s private sector, which is seen as a force for economic and potentially political reform in the Islamic Republic.
Many of the Iranians at the conference – which this reporter attended as a moderator of a panel with European ambassadors to Iran and a participant on a panel on Iran and political risk – are members of the private sector. Many are Western-educated and are longing for a more normal relationship between Iran, Europe and the United States.
“What we are asking for is just trade finance which is completely transparent and doesn’t create any kind of risk for the banks,” Mostafa Behesti-Rouy, director of international affairs for Bank Pasargad, Iran’s largest private bank, said in an interview. Behesti-Rouy, a graduate of Portland State University, said that it was in the interest of both Iran and the international community to strengthen Iran’s private sector.
Esfandyar Batmanghelidj, one of the organizers of the conference, acknowledged the challenges Iran faces to recover from sanctions and re-enter the global economy.
“None of us is under any illusions that Iran faces many obstacles on the long road to a more just society,” he told the meeting. “Today the Iranian people are deciding what they want their country to be… We believe that it is a mistake to ignore or discount members of the business community as potential civil society leaders. Business leaders can be a force for good in Iran.”
Mehdi Karbasian, chairman of IMIDRO, an Iranian industrial conglomerate, injected a note of realism and patience to the debate.
“A sick person takes time to be really healthy,” he said of the Iranian economy. “Give him soup, not chelo kebab [an Iranian national dish of grilled meat]. Sanctions hurt us so much — and Europe and the United States. In the near future, we can have a good steak.”
Barbara Slavin is Acting Director of the Future of Iran Initiative at the Atlantic Council in Washington.