Iran eyes Asian, Swiss banks for sanctions-free trade

Iran eyes Asian, Swiss banks for sanctions-free trade

Move could ease payments of some $18 billion worth of food and medical imports annually

Iran's Deputy Foreign Minister Abbas Araqchi (C) is surrounded by journalists following a press conference on November 10, 2013, in Geneva. (AFP/File Fabrice Coffrini)
Iran's Deputy Foreign Minister Abbas Araqchi (C) is surrounded by journalists following a press conference on November 10, 2013, in Geneva. (AFP/File Fabrice Coffrini)

TEHRAN — Iran wants to use Japanese, South Korean and Swiss banks to handle international trade exempted from Western sanctions under a landmark nuclear deal, a senior official said on Tuesday.

Intensifying US sanctions since 2008, mirrored by the European Union in 2012, had effectively shut Iran out of the international banking system, making all foreign trade difficult.

But under the November agreement, which went into effect last week, major powers agreed Iran could set up a financial channel to pay for the import of goods already exempt from Western sanctions.

The same designated banks will be used to handle income Iran receives from the partial easing of EU and US sanctions over the next six months in return for its scaling back of its controversial nuclear program.

“Under the Geneva agreement, a banking mechanism is to be designated by the United States and Western countries… for purchases of food products, medicines and medical equipment,” said Abbas Araqchi, one of Iran’s top negotiators.

“Banks from Japan, South Korea and Switzerland have been selected,” Araqchi told Iranian media, without naming the banks.

Araqchi said the move would facilitate some 18 billion dollars a year in food and medical imports that are not themselves subject to Western sanctions but which Iran has struggled to make payment for because of the Western banking sanctions.

The same mechanism would be used to handle revenues from the slightly more than one million barrels per day in oil exports Iran is allowed to make under the agreement, which are expected to generate some $15 billion in revenues.

It would also handle Iran’s petrochemical exports, now fully exempted from Western sanctions, which were previously running at just over $8 billion a year but which Araqchi said could now rise to $20 billion a year.

In addition, it would be used to manage some $4.2 billion in frozen assets that the European Union and the United States are to release in stages during the next six months, he said.

In return for the easing of sanctions, Iran undertook to limit its enrichment of uranium to five percent purity, halting enrichment to the higher levels that had prompted Western concern on whether its intentions were entirely peaceful.

It also undertook to neutralise its existing stockpiles of higher-enriched uranium and to suspend work on a heavy water reactor it had been building near the central town of Arak.

The agreement lasts for an initial six months while the two sides hold talks, expected to start in New York next month, on a comprehensive deal. But it can be extended for a further six months.

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