TEHRAN: Petrochemical suppliers in Iran are strengthening their internal financial processes to prevent any snags in export operations when international sanctions are lifted, allowing them to deal directly with overseas customers, industry sources said on Friday.
“Suppliers in Iran are confident sanctions will be lifted by Q1 [first quarter] or Q2 [second quarter] next year. They are currently putting forward new financing frameworks to make sure operations run smoothly once sanctions are lifted,” said a source close to a major polyethylene (PE) supplier in Iran.
Iran is looking forward to the lifting of international sanctions after agreeing with world powers in July to curb its nuclear program. Suspicion that the Middle Eastern country was developing nuclear weapons prompted the imposition and eventual tightening of the sanctions, as initiated by the US and EU.
The sanctions virtually crippled Iran’s ability to ship out crude and petrochemicals, as all local enterprises were barred since 2012 from participating in the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network, to accept letters of credit (LCs) and bank transfers from buyers and to make payments to international partners.
Hoping for a return to the SWIFT network by the first half of 2016, Iranian petrochemical companies have started setting up new accounts with local banks for various export markets, industry sources said.
The petrochemical companies are targeting to have their internal financial frameworks ready by the first quarter.
“We want to be prepared first, so when sanctions are lifted, we are ready to do business,” a Tehran-based petrochemical source said.
But uncertainties remain on when the sanctions will be lifted and whether such action will be accompanied by some restrictions, industry sources said.
At present, Iranian suppliers do not receive payments directly from buyers, but through international bank accounts in the financial hubs of Dubai, Hong Kong and Shanghai.
“We pay to a bank account in Dubai or Hong Kong and send an email to our suppliers to ask for receipt of payment,” according to a buyer of Iranian PE and polypropylene (PP) based in Asia.
However, distributors or buyers said they sometimes find themselves in limbo when fund transfers take longer than expected.
The current payment process to Iranian petrochemical companies typically takes days to a week, but delays of around two weeks are not uncommon, industry sources said.
