said Monday.
Traders polled across the Middle East and Asia said that they used various payment methods to get around the problem.
"Frankly, even if banks in Dubai are ... becoming cautious of opening L/Cs from Iran, we have no problem. We now pay through cheques to Iranian companies. Several other solutions like 'hawala' and payments through an escrow account are also being used," a Dubai based trader said. "Products from Iran are cheaper for us."
An escrow account requires the involvement of a third party trusted both by the importer and the exporter. Here, money is put into the account of the third party by the importer of petrochemicals from Iran, and is released to the seller when the consignment reaches him.
"Hawala" transactions, popular in India and Pakistan for remitting money through unofficial channels, on the other hand, involves paying the amount to be remitted to an agent in the sender's country. Later, the agent's appointee in the country where the money is to be remitted makes the end-payment.
Dubai has a huge population of Iranian expatriates and therefore "hawala" transactions are considered easy.
There are about 8,000 Iranian businesses in Dubai according to the Iranian Business Council, a Dubai-based industry group. Of these, 1,200 companies are trading companies. Though no fresh estimates are available, in 2009, the total trade between Iran and Dubai stood at $12 billion.
An Iranian trader based in China said that he had found solutions to continue trading in the country. "The Bank of China had earlier stopped opening our L/Cs saying that some of their US-based investors objected to the bank doing business with the Iranians. But there are several other banks in
China eager to deal with us. Our trade with China is worth billions of dollars annually and banks cannot ignore us," the trader said. "I have an account in a Chinese bank and I remit money to whoever I want to in Iran or anywhere in the world."
China-Iran commerce has continued to grow, and the total trade stood at $21.2 billion in 2009.
Industry sources in India said that it was the private banks, wary of upsetting their US investors, which declined to open L/Cs from Iran. "But government banks do open L/Cs. The currency is euro or yen instead of the US dollar," a sources close to India's IG Petrochemicals that imports orthoxylene cargoes from Iran said. Importing Iranian cargoes has become difficult but it is not impossible, he added.
Government-run State Bank of India has an office in Tehran, and Indian banks like the Punjab National Bank have opened an office at the Dubai International Financial Centre, or DIFC, which is known to be frequented by Iranian traders.
Though there are no estimates of the trade with Iran that is directed through institutions based in the DIFC, Iran-India bilateral trade is estimated to be worth $14 billion, and India imports about 350,000 b/d of crude oil from Iran.
While US-led sanctions on Iran, that were recently given "more teeth" through a law passed on July 2, do not cover the export of petrochemicals from Iran, they focus more on preventing the export gasoline to Iran and on stopping investments into the Iranian energy sector.
As banks across Asia having larger business interests in the US have been cautious of entering deals in which one of the parties is Iranian, the country recently came up with a solution to the problem, changing article 44 of the constitution that previously allotted banking rights exclusively to the government.
"Following the removal of legal obstacles to the establishment of foreign banks in Iran, a large number of requests have been filed with the CBI [Central Bank of Iran]," Iran's Deputy Finance Minister Asqar Abolhassani recently told Iran's Fars News Agency.
Abolhassani put the number of international banks that are in talks with the CBI to set up offices in Tehran at eight.
China ChemNet will hold China SNG/CBM (International) Summit on 10-12 Nov, 2010 in Changji City of Xinjiang Province. This summit is the high-end international summit under the guidance of authorities and experts, conference topics include five major aspects of policy interpretation, industry research, business promotion, business meetings and Sino-foreign cooperation, is not only the new type coal chemical industry conference, but also the best opportunity to energy giant polymerization, government and enterprises investment, investors looking for the project. Sincerely welcome you to attend the summit. Details: http://news.chemnet.com/list/zt/meeting/2010energy/index.html
