A new IMF estimate has led to claims that Iran’s gross international reserves have been “wiped out.” But a closer look at the data makes clear that this is far from the case.
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A new IMF estimate has led to claims that Iran’s gross international reserves have been “wiped out.” But a closer look at the data makes clear that this is far from the case.
Unwinding sanctions will be central to reviving the nuclear deal. If the Biden administration wants a lasting solution, it must involve Iran’s central bank governor.
Iran will expect economic benefits as part of any mutual return to compliance with the nuclear deal. If Washington and Europe hope to offer a meaningful economic incentive, engaging with the private sector and managing Tehran’s expectations will be key.
The Financial Action Task Force (FATF), a global body that sets standards to combat money laundering and terrorist finance, has placed Iran back on its infamous “blacklist,” following the failure of Iranian policymakers to enact two key bills in accordance with an action plan set in 2016.
For the first time, the Treasury Department has issued a letter of comfort to a foreign financial institution conducting sanctions exempt trade with Iran. This move, made in accordance with the launch of a new Swiss channel for humanitarian trade with Iran, could introduce a new tool for U.S. authorities which have struggled to provide credible sanctions relief.
◢ The state-owned company at the center of European efforts to save the Iran nuclear deal is entering its next phase of development. In a push to process transactions more quickly, INSTEX is rolling out a new factoring service for European exporters. The company is also making new hires that will enable it to expand operations more quickly in the coming year.
◢ Following weeks of speculation, France, the United Kingdom, and Germany (the E3) have formally registered a special purpose vehicle (SPV) to help facilitate trade with Iran – trade that the return of US sanctions has significantly hampered. Companies in Europe and Iran are eager to know if the system can be of practical use. The assessment below lays out INSTEX’s likely structure.
◢ Technical work on Europe’s SPV for Iran trade continues to move forward. Meanwhile, the Iranian government seems content to exercise “strategic patience” as it waits for the new mechanism to come online. But while this patience is commendable, Iran should be taking a much more active role in shaping the SPV to suit its needs.
◢ On 5 November, the Trump administration’s latest and most significant wave of sanctions against Iran came into effect. The US Treasury has issued a list of more than 700 Specially Designated Nationals (SDNs) and Blocked Persons, which includes roughly 300 entities that did not feature in Obama-era sanctions. The new sanctions impact Iran’s oil and transportation industries and banking sector in important ways.
◢ With US sanctions on Iran’s banking sector due to come into effect soon, European countries are now considering measures that would facilitate trade transactions with Iran through a new legal and institutional structure. European governments have been reviewing this legal entity, known as a Special Purpose Vehicle (SPV), for months. The timing of this public announcement suggests that they have a degree of confidence that the SPV can become operational, and that Europe can use the model to showcase its ability to deliver on its commitments.
◢ German foreign minister Heiko Maas recently penned an article in which he said that "it’s essential that we strengthen European autonomy by establishing payment channels that are independent of the US, creating a European Monetary Fund and building up an independent Swift system." So what exactly is Maas's quibble with SWIFT, the Society for Worldwide Interbank Financial Telecommunication? SWIFT is a proprietary messaging system that banks can use communicate information about cross border payments. This November, U.S. President Trump has threatened to impose sanctions on SWIFT if it doesn't remove a set of Iranian banks from the SWIFT directory.
◢ The Iran nuclear agreement marked its third anniversary in a gloomy state. Many hoped that the resolution of the nuclear dispute would result in a new understanding between the West and Iran, opening a pathway for detente rather than confrontation. Relations between Europe and Iran have certainly made gains in this direction, but the Trump administration’s maximalist stance on Tehran has created an extremely hazardous environment for all remaining stakeholders in the nuclear deal.
◢ A few days ahead of an international meeting in which Iran’s efforts to improve anti-money laundering and counter-terrorist financing (AML/CFT) standards will be reviewed, Ayatollah Ali Khamenei appeared to pour cold water on the reform process. Yet, it is premature to assume that Iran’s consultations with the Financial Action Task Force (FATF) are suddenly over after two years of close coordination. As the FATF’s plenary meeting approaches, the stakes are high for Iran, which is seeking another extension for implementation of its action plan.
◢ Ireland’s Workplace Relations Commission has fined an unnamed bank EUR 20,000 for discrimination against an Iranian couple. The ruling points to a growing case precedent in Europe on acts of sanctions over-compliance which lead to discrimination of Iranian persons or individuals and businesses who maintain financial links to Iran.
◢ Iran's inability to link with the European banking system stems in part from a lack of capacity in key governance and compliance functions.
◢ In the 1990s, European governments launched substantial "training and technical assistance" programs to help post-Communist states raise standards. Iran needs similar programs, and a model from Sweden may be the most effective.
◢ Bank account closures of British-Iranian citizens underline the deep fear among banks of Iran-related transactions.
◢ Successful sanctions relief will depend on a concerted effort to raise the comfort level of banks with the compliance and regulation around Iran business.
