KABUL: Afghan banks have started declining request to process transactions of exporters requiring Iranian port services.
Banks’ stance could jeopardise exports to the Central Asian and CIS countries, and even Afghanistan, industry sources told FE.
Exports to the Central Asian and CIS region account for over $3 billion annually. The annual trade figure, including imports, stands at $8 billion.
Shipment through strategically located Iranian ports to nearby countries is expected see exponential growth in the coming years. Therefore, such hurdles to exports could mean loss of business opportunity worth billions of dollars to the exporters, said sources.
Iran is still in talks with the US and Europe to end international sanctions imposed on it for alleged illegal nuclear activities. However, for most exporters, a convenient way to export to CIS/Central Asian region and Afghanistan is to first ship the consignment to Bandar Abbas port in Iran and from there gets the merchandise goods sent to countries in area via rail or road.
Sources said there are cases where banks (the nominated banks that forward the importer’s payment to the Indian exporter) — on finding that the consignments are to be routed through Iranian territory — refused to accept letters of credit and other supporting documents issued by importers’ banks based in such countries such as Uzbekistan. The cases that FE came to know are mostly concerning the engineering goods sector.
Sources said Engineering Export Promotion Council, India, (EEPC) recently took up the matter with the commerce and finance ministries. The ministries, instead, want the exporters to raise the matter also with the banking regulator RBI and the banking industry apex body Indian Banks’ Association (IBA), they added. When contacted, a senior commerce ministry official said: “Banks might be having apprehensions about any Iran-related trade. We need to address the grievances of exporters.” IBA officials said they are yet to get a formal complaint from the exporters.
As international sanctions on Iran are yet to be removed, Indian banks fear facilitating trade that directly or indirectly helps Iran could bring them under the scanner of the Office of Foreign Assets Control (OFAC) of the US Treasury Department administering and enforcing economic and trade sanctions such as those imposed on Iran.
As Indian exporters are increasingly diversifying into markets such as Central Asia/CIS (from traditional markets such as the US and Europe) and are looking to route their trade to these relatively untapped markets even through Iranian ports, it is important that RBI educates Indian bank officials on the actual OFAC norms so that they do not go by what they think is wrong or take decisions on the basis of partial information, Sahai said.
