Markets to be explored - Iran

Sanctions and payments in Iran
The restrictive measures adopted in economic and trade relations with Iran can be traced to Resolution 1737, implemented by the United Nations Security Council in 2006, and subsequent amendments.

Sources and procedures that Italian operators are required to follow can be viewed on the website of the Ministry of Economic Development/International Trade: www.mincomes.it (Topics/products and technologies with dual use). The website lists, in addition to juridical persons, entities and organizations, also product types and technologies for nuclear or military end use, currently affected by the sanctions.

On January 23rd, 2012, the EU adopted a new set of sanctions, which, in addition to the previous limitations on the sale of all products with military or nuclear applications, have placed a total embargo on Iranian crude oil and petrolchemical products, as well as exports to Iran of equipment and technologies essential to this sector. It is also prohibited to make new investments in an Iranian petrolchemical concern or to asssociate oneself with it in a partnership. The oil embargo went into effect on July 1st (already signed contracts were valid until that date).
The ministers also added to the black list the Central Bank of Iran and Tejarat Bank, effectively blocking all direct financial channels from Europe to Iran.

It is still permissible to work through intermediary countries not participating in the embargo or international agencies offering financial assistance services.
Aside from the oil, gas and petrolchemical sectors mentioned above, legitimate trade of products belonging to other sectors may continue, as long as one respects the conditions now made much more burdensome by the increased difficulty of finding solutions to the problem of payments.

Working documents issued by internal Iranian authorities
The authorities governing policies and supervising the operation of Iranian financing and loan institutions is the Iranian Central Bank. The documents issued by it can be viewed in Farsi (the official language of Iran) on the website www.cbi.ir.
The choice of which form of payment is mot suitable to the transaction’s requirements and which credit institutes on which to rely need to be carefully reviewed with the help of experts in the sector.
For the above reasons, today it is more complicated to make predictions more than three months into the future on the reliability of Iran in terms of loans and financing. Those most affected are Italian concerns  involved in large infrastructural projects, who face difficulty in getting letters of credit opened by Italian banks. SIMEST and SACE are also currently holding a firm position on Iran.

Tips on payments when doing business with Iran
Until the sanctions went into effect, the payment method most frequently employed by operators was the irrevocable letter of credit. At the moment, that solution is still viable, although it is difficult to obtain confirmation for the letter of credit.
During the contract drafting phase, operators are advised to negotiate for 30% of the payment to be made in cash, 30% in a foreign account held by the customer and the remaining part using one of the channels identified below, taking care to ascertain that the Iranian person or company involved has not been included on the black list and that working with the Iranian bank in question is permitted.

Foreign banks of countries not participating in the UN sanctions. It is advisable to avoid using banks in Dubai as intermediaries, considering the fact that, as of August 2010, in order to fight tax evasion, a statement was realeased by the Italian revenue agency which adds Dubai to the list of countries with “facilitated taxes” (tax havens). So all commercial operations originating in this city of the UAE are subject to mandatory monthly reports to the revenue agency and possibly requests of information by the same from the Italian operator. Some banks can, as a sole condition for carrying out the transaction, employ a currency other than USD or Euro.

Italian banks. The position of the most important Italian credit institutes concerning opening letters of credit for Iran is at the moment closed, but the possibility has not been ruled out of finding in Italy small-medium banks willing to open letters of credit for Iran. We thus advise doing some research, turning in particular to credit unions. The ABI policies communicated by Italian credit institutes working with Iran impose notification to the national government on every transaction valuing more than 10,000 euro and obtaining prior authorization for more than 40,000.
For this specific authorization, the Italian bank contacted will have to make express request to the “Committee for economic security”, an istitute of the Department of Treasury of the Ministry of the Economy and Finance. Authorization is considered granted if the Committee of financial security has not denied the request within four weeks of its being sent.
In compliance with the rules indicated above, Italian operators who are already in business with Iran must follow the following procedures:
Phase I - Verification by the Ministry of Economic development concerncing whether the product is subject to “dual use” export restrictions;
Phase II - Request by the financial intermediary to the Committee of financial security for authorization to transfer funds exceeding 40,000 euro.

For information on agencies offering assistance and financial support between Italy and Iran with branches operating in the two countries, contact [email protected]