EghtesadOnline: Two Indian banks have asked exporters to complete their financial transactions with Iran by August in response to the threat of new US sanctions, according to the country’s main exporters’ organization and bank letters seen by Reuters.
US President Donald Trump earlier this month pulled out of the 2015 nuclear accord with Iran and ordered the reimposition of US sanctions.
India and Iran have longstanding political and commercial ties, but New Delhi has been careful to not fall foul of US sanctions on Iran.
The Federation of Indian Exporters Organization said IndusInd Bank and UCO Bank, which facilitate exports to Iran, had set August 6 as the deadline for winding up deals, according to Financial Tribune.
“IndusInd and UCO banks are telling exporters that you complete all Iran business by August 6,” Ajay Sahai, director general of FIEO, said.
Indian exporters mostly receive payments in rupees for exports to Iran, under a mechanism devised in 2012 when banking channels were restricted due to the US sanctions.
Iran’s top oil customer after China, India, had implemented a barter-like scheme that allowed it to make some oil payments to Tehran in rupees through UCO Bank.
IndusInd Bank in a May 24 letter, seen by Reuters, asked Indian exporters to provide a declaration from customers that the entire export LC (letter of credit) transaction would be completed before August 6.
An Indian exporter executing Iranian orders worth 90 million rupees said he was worried because he would get some payments in the second half of August.
“How does an exporter feel safe? I don’t know whether I will get my money or not,” said the exporter, who did not wish to be identified. He said payment for an Iranian export order normally takes between one to one-and-a-half months.
Indian companies receive payments for exports to Iran using the oil payments held in rupee balances at UCO.
The mechanism helped India to narrow its trade deficit with Iran from about $11.3 billion in 2011-12 to about $3.5 billion in 2015-16, when the Iran sanctions were lifted.
In the fiscal year to March 2017, India’s trade deficit with Iran widened to $8.24 billion, according to the government data.
UCO Bank told the above-mentioned exporter that payment would be made only if the Iran account had enough money.
“Payments will also be subjected to any trade restrictions/currency restrictions being put in place by USA post 08-05-2018 and as per the government of India guidelines on the date of claim,” UCO said in its letter to the exporter dated May 29, which was seen by Reuters.
UCO Bank Chairman R. K. Takkar told Reuters his bank was continuing with the rupee mechanism. He refused to elaborate on the letter issued by his bank and said Iran had 18 billion rupees in its account with UCO.
Swiss Bank Announcement
Swiss lender Banque de Commerce et de Placements (BCP) has suspended new transactions with Iran and is winding down activities with the country after US President Donald Trump’s pullout from the nuclear deal with Tehran, the bank said on Tuesday.
“We have suspended any new transaction related to Iran after May 8, 2018, and started the ‘wind down period’ within the framework of OFAC announcement,” the bank said in an emailed statement to Reuters, referring to the US Treasury’s sanctions enforcement arm.
Trump’s withdrawal from the accord on May 8 was announced in tandem with the reimposition of US sanctions within 180 days, prompting several European companies to announce their exit from Iran.
However, small German banks say they plan to maintain their dealings with Iran even after the United States reinstates sanctions against the country in November.
AFP said in a report this week that the determination of small lenders to keep their Iran business was because interest in sensitive markets like Iran and Sudan had seen a significant rise among enterprises from Germany and Switzerland over the past few years.
“We will continue to serve our clients,” for now, said Patrizia Melfi, a director at the “international competence centre” (KCI) founded by six cooperative savings banks in the small town of Tuttlingen in southwest Germany.
German exports to Iran have grown since the nuclear deal was signed in 2015, increasing 15.5% last year to reach almost €2.6 billion ($3.0 billion) after a 22% growth in 2016.
Nevertheless, KCI will “wait and see what the sanctions look like” before turning away from Iran, Melfi was quoted as saying by AFP.
AFP added that among Germany’s roughly 390 Sparkasse savings banks, business with Iran is mostly limited to producing documents linked to export contracts.