New indications of a major opening in business with Iran appeared on Thursday when officials in Washington said the Obama administration may soon allow dollars to be used in doing business with Iran.
The Associated Press said in a report that the Obama administration may soon tell foreign governments and banks they can start using the dollar in some instances to facilitate business with Iran in what could provide Iran with the best of the removal of the US-led sanctions.
The AP has quoted unnamed officials as saying that the Treasury Department is considering issuing a general license that would permit offshore financial institutions to access dollars for foreign currency trades in support of legitimate business with Iran.
Several restrictions would apply, but such a license would reverse a ban that has been in place for several years.
If approved, the new guidance would allow dollars to be used in currency exchanges as long as no Iranian banks are involved, reported AP. “No Iranian rials can enter into the transaction, and the payment wouldn’t be able to start or end with American dollars. The ban would still apply if the final payment is intended for an Iranian individual or business on a US sanctions blacklist,” it added.
Iran saw a series of draconian economic sanctions lifted in mid-January when a nuclear deal that it had sealed with the P5+1 – the five permanent members of the Security Council plus Germany – was eventually implemented.
Nevertheless, the American banks are still banned from dealing with Iran as part of an old US trade embargo that still remains in place. Accordingly, this is believed to have already effectively blocked any transactions with Iran which is based on US dollars because they would ultimately have to be cleared in the US.
Indications had been specifically growing lately that a legacy of hefty fines by the US on banks that are caught for violating Iran sanctions is deterring businesses from trading with Iran.
Reuters in a recent report warned that corporate leaders have already become frustrated over this even though the sanctions removal against Iran would have naturally meant the doors are open for investments in Iran.
The complications over using the dollar have made Iran adopt an initiative to ditch the greenback and trade with other countries through other currencies.
Last Thursday, Pakistan’s media reported that the country is working on a plan to switch from the dollar to the euro in trading with Iran.
A similar scheme was reported in February to have been put on the agenda of the Brazilian government.