TEHRAN: European banks are tentatively re-engaging with Iran as the Middle East’s second-largest economy slowly emerges from a sanctions regime that has kept it in the financial wilderness for years.
Belgium’s KBC, Germany’s DZ Bank both confirmed when contacted by the Financial Times that they have started handling transactions on behalf of European clients doing business in Iran. Austria’s Erste Bank is preparing to do so. However, bigger European banks remain on the sidelines alongside their US rivals, scarred by a string of multibillion-dollar fines for earlier sanctions breaches in Iran.
This is causing growing frustration among officials in Iran and Europe about the slow pace with which Tehran is being reconnected to the global financial system.
In January, Iran and six leading powers — US, Britain, France, Russia, China and Germany — implemented an agreement reached in July when Tehran agreed to scale down its nuclear activities in return for lifting of some sanctions.
But the continuation of many US sanctions relating to other issues, such as facilitating terrorism, has made many international banks wary of working with Iranian institutions and individuals.
The chairman of one of Europe’s biggest banks said: “All the lawyers’ reports I get continue to say there are still many sanctions left on Iran. It is difficult to know who you are dealing with as it has become uncharted territory.” Banks have paid more than $15bn in fines for breaching sanctions in various countries over the past five years. The most costly was the $8.9bn penalty for France’s BNP Paribas in 2014.
