July 14 marks the anniversary of the Joint Comprehensive Plan of Action (JCPOA) signed between Iran and France, the US, China, the UK, Russia and Germany. About six months later, the sanctions were officially lifted based on Iran’s completion of the agreement’s measures meant to limit its nuclear activities.
Since January 20, 2016, known as Implementation Day, companies across the globe have been flooding to Iran to sign deals, and Iranian representatives have also visited a number of countries in Europe and Asia to foster business relationships.
Countless contracts have been signed, but European companies of all sizes are still unable to secure support from banks, even for open account transactions.
“We’re close to signing our first contracts but it’s tough. We still don’t have a bank willing to provide a guarantee. We’re are negotiating strict downpayments with clients. For payment processing, we found a small regional French bank,” one French company told GTR at the end of May, on condition of anonymity.
Small regional banks are the only ones that have accepted Iranian business so far, but large corporates need the support of large banks. Airbus, for example, has been open about its struggle to find a bank willing to handle its US$27bn deal with Iran Air, signed in February 2016.
This reluctance is due to one factor only: the US’ mixed signals when it comes to the JCPOA. While President Obama has been a strong supporter of the deal, the Republican-dominated congress has criticised it, and recent legislative moves are likely to scare banks even more.
In an attempt to block a US$25bn deal through which Boeing is planning to sell planes to Iran Air, congress passed three measures re-imposing financial sanctions on various Iranian entities and sectors, effectively preventing Boeing from receiving financial support for its transaction.
On July 11, the White House confirmed President Obama’s intention to veto the three bills, which go against the progress made through the JCPOA. “These bills would undermine the ability of the US to meet our JCPOA commitments by reimposing certain secondary economic and financial sanctions lifted on Implementation Day. The president has made it clear that he will veto any legislation that prevents the successful implementation of the JCPOA. If the president were presented with H.R. 4992, H.R. 5119, or H.R. 5631, he would veto these bills,” the White House says in the press statement.
Specifically, the administration points to H.R. 4992, which would reapply secondary sanctions on Iran’s financial sector by prohibiting permissible financial transactions between Iran and the international community that are wholly outside the US financial system – exactly what the international banking community has been worried about.
“This would amount to a harmful and unnecessary overreach. This bill seeks to directly undermine Iran’s conduct of banking transactions outside of the US – activity that became permissible on Implementation Day in return for Iran meeting its nuclear-related commitments,” the statement continues.
While European banks will certainly take comfort in President Obama’s strong stance on regulations blocking the full implementation of the JCPOA, the power play between the president and congress is far from reassuring. In truth, it’s unlikely banks will trust the US not to penalise them for doing trade with Iran until a new president is elected in November, bringing more certainty as to the country’s long-term policy towards Iran.
Shahin Shamsabadi, head of business intelligence Mena at The Risk Advisory Group, tells GTR: “Ultimately, when assessing the current state of affairs and trying to determine what a potential timeline will look like, an observer needs to look to the US and not Iran. Yes, the Boeing deal has hit a snag but the Iranians can take some solace in the fact that it is likely that President Obama will veto any bill that comes across his desk vetoing the transaction. It is, however, unclear whether the next US president will stay the course of re-engagement with Iran and provide the same support for the deal that has been the hallmark of the Obama administration.
“Neither Clinton nor Trump are viewed as potential honest partners by the Iranian government. As a consequence, all indications are that the Iranian government is heavily invested in the Boeing deal being completed before the end of Obama’s presidency in order to set a precedence. It is one of those rare occasions when the presidents of Iran and the US have a common objective and timeline to get things done.”