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US assures banks on Iran but questions persist

13 Apr 2016 21:33 (+01:00 GMT)
US assures banks on Iran but questions persist

Washington, 13 April (Argus) — The US Treasury is working with foreign banks to ensure Iran can access its foreign currency reserves frozen as a result of nuclear-related sanctions.

But non-US banks remain cautious over conducting deals with Iran, even in euros, and other barriers remain to doing business with that Opec member, leading oil trading firms say.

"Many questions persist in part because of the remaining primary embargo and non-nuclear sanctions on Iran," said acting undersecretary Adam Szubin, who oversees the Treasury's sanctions office. "It is not in our interest to create artificial barriers to transactions" that the US and Iran agreed in the nuclear deal, he said today at a forum hosted by Washington-based think tank Foundation for Defense of Democracies.

The US Treasury is facing a dual task of addressing Iranian complaints about accessing foreign banks since the nuclear-related sanctions were lifted on 16 January and maintaining an extensive sanctions regime imposed because the US continues to designate Iran a state sponsor of terrorism.

The lifting of nuclear-related sanctions allowed Iran to resume sales of crude oil in international markets and to access its currency reserves frozen in foreign banks. The Treasury estimates the previously frozen assets at more than $100bn but says only half of it would be available in cash, and that an even smaller amount could be repatriated to Iran.

Iran apparently has trouble repatriating some of the funds because the foreign banks holding them are concerned about potential violations of the remaining US sanctions, Szubin said. The Treasury will work with foreign regulators and banks, as well as with Iran, to ensure that Iran can access its funds, Szubin said. "We are in no way blocking Iran's access to these funds, and we are not encouraging banks or other partners to do so."

The Treasury does not plan to allow direct access to the US financial system for Iran, Szubin said. Szubin also ruled out allowing the so-called "u-turn transactions," or US dollar transactions by foreign banks on behalf of Iranian institutions that are indirectly processed through a US bank.

But foreign banks working outside of the US could conduct dollar transactions with their Iranian clients without accessing the US financial system, assistant secretary of state Anne Patterson told a US House of Representatives panel today. Such transactions do not violate existing US rules if they do not involve entities on the US sanctions list.

"We will not stand in the way of permissible business activities involving Iran," Szubin said. "We are very careful to deliver on the promises we made to Iran throughout the negotiations."

Iran's crude output was 3.15mn b/d in March, up by 290,000 b/d since the relief of the nuclear-related sanctions. Around 300,000-500,000 b/d of Iranian production has returned to the market, trading firms say.