28 Mar 2024
Thursday 8 September 2016 - 10:12
Story Code : 230471

Russian banks race to front of queue to enter Iran's banking sector

While the authorities in the US and EU continue to drag their feet on sanctions and hamper cooperation with Iran, Russian banks are keen to fill the gap in the opening Iranian market, Russian newspaper Izvestiya reported.

Russian banks are striving tobe the first inline afterthe partial lifting ofsanctions againstIran, Russian newspaper Izvestiya reported onWednesday.

In January the US and EU announced the lifting ofall economic and financial sanctions againstthe Islamic Republic associated withits nuclear program, enabling Tehran toaccess previously frozen assets, use international financial messaging services such asSWIFT, and sell oil and other raw materials toEU countries. Experts inthe banking sector told the newspaper that while Western banks are waiting forguidance fromthe authorities ontheir prospects forcooperation withIran, Russian banks are keen toget a head start. Russian banks do not currently have a presence inIran, while a single Iranian bank operates inRussia, called "Mir Business Bank." The bank is a subsidiary ofBank Melli Iran and 70 percent ofits customers import and export goods such asgrain, timber and food products betweenRussia and Iran. "Iran is emerging fromyears ofsanctions, the quality ofbanking services there has declined and Russian players can enter the market withinteresting products forbusiness and the public," said Anatoliy Aksanov ofRussia's Association ofRegional Banks.

"It is obvious that the amount oftrade betweenRussia and Iran is going toincrease. It would be expedient tofind a niche while there isn't stiff competition fromother international organizations," Aksanov explained.

"Our banks can start withservicing bilateral contracts withIran, similar toMir Business Bank. Then the volume ofbanking services can be extended, and if there is demand forthem then smaller banks can enter the market," said Tamara Kasyanova ofconsulting firm 2K. A source inRussia's central bank told Izvestiya that it recently held talks withits Iranian counterpart todiscuss cooperation inthe financial sphere. "Russia and Iran are preparing toincrease trade, so the question has arisen ofcloser cooperation withthe central bank," the source said. In November last year Russia's trade representative inIran Andrey Lugansky told Rossiyskaya Gazeta that Russia and Iran are discussing the creation ofa joint clearing bank toenable the two countries toincrease their trade. The volume oftrade betweenthe two countries was $5 billion in2015, much ofwhich took place throughintermediaries such asCyprus and the UAE, he said.

By importing fromcountries towhich Iran exports oil, such asChina, South Korea, India and Japan, Russia's exporters should able tosell the technology Iran needs using those currencies rather thanthe dollar and euro, Lugansky explained.

While Russian firms are keen toincrease trade withIran, their Western counterparts still appear fearful ofrepercussions fromthe authorities.

In March Iran's Supreme Leader Ayatollah Ali Khamenei told Iranian television that US authorities are dragging their feet onlifting sanctions, and that Iran's international financial transactions face problems because banks "fear the Americans."

"The Americans have not acted ontheir promises and (only) removed the sanctions onpaper," Khamenei said. While they have lifted some sanctions followingthe July 2015 nuclear agreement betweenTehran and the 5+1 countries, the US and EU continue toimpose some sanctions againstIran associated withits ballistic missile program, which Tehran maintains has purely defensive purposes. In July the US House ofRepresentatives blocked a deal betweenBoeing and Iran Air tosupply 118 passenger planes toreplace Iran's ageing fleet. The move also prevents a similar deal betweenIran Air and French manufacturer Airbus, sinceits planes use some parts fromBoeing. The US representatives claimed Iran could modify the jets and use them formilitary purposes.

By Sputnik
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