Iran’s Economy Still Constrained, but More Countries Strive to Reenter Market

A report published by Reuters on Wednesday quoted an official in the National Iranian Oil Company as acknowledging this reluctance and saying that the extent of Iran’s increase oil output in the month of March would depend in part upon how much of this wariness persisted in the days and weeks ahead. Specific areas of concern for the Iranians are the international banking system and providers of shipping insurance. Last month Iran regained access to the Belgian-based SWIFT international transfer system, but the country remains largely shut out of major banks even after sanctions on the Iranian nuclear program were suspended in mid-January.

These persistent restrictions may yet slow Iran’s progress at a time when Western policymakers are still debating the possible consequences of Iran’s full return to international markets and its reclamation of frozen assets that many expect to contribute to Iran’s well-recognized terrorist financing.

But at the same time that the Reuters report illustrates persistent constraints, it also points to the steady trickle of expanded access, international trust, and bilateral trade agreements. Indeed, some countries both inside and outside of Europe are so eager to reestablish trade and especially oil trade with Iran that they are finding ways to circumvent the international banking systems that they might otherwise rely on.

In the case of India, another Reuters report indicates that Iran’s second largest Asian oil buyer is restoring the Islamic Republic’s access to the Asian Clearing Union, an organization that “facilitates payments among members, economising on the use of foreign exchange reserves and transfer costs, as well as promoting trade and banking relations among participants.” In addition to India, those participants include Pakistan, Bangladesh, and Sri Lanka.

And these facilitation efforts are indicative of a broader willingness to re-engage with Iran, even by countries that were formerly keen on complying with US-led sanctions, and were worried about the prospect of upsetting the US by drawing closer to a traditional enemy. Recent moves by countries such as South Korea seem to suggest that the US is and will remain far more tolerant of open economic relations with Iran than it has been since before sanctions were first implemented.

Forbes reports that South Korea has signed a memorandum of understanding with Iran and is looking to Iran as a potential partner in making up a nearly 13 percent decline in South Korean imports compared to February of last year. Forbes notes that this move stands in contrast not only to the traditionally very strong relationship between the US and South Korea, but also to the wariness that would be expected in the wake of numerous reports of Iranian collaboration with North Korea over both countries’ nuclear programs.

If countries with such well-established reasons to steer clear of the Islamic Republic are nonetheless pursuing expanded trade relations, it is little surprise that more remote US allies are taking cautious steps to reenter the Iranian market. These include Australia, which Reuters reported as suspending its nuclear-related sanctions on Iran several weeks after the European Union and the United States took the lead in doing the same.

But the Reuters report also indicates that non-nuclear sanctions ostensibly remain in full effect, just as they do in the US. And in moves that may come as a relief to persons who doubt the Obama administration’s willingness to impose enforcement measures against Iran in the new geopolitical environment, some of those sanctions are still leading to arrests.

Courtroom News Service reported on Wednesday that a New York man named Erdal Kuyumcu had been arrested the prior day on charges that he had transferred to Iran thousands of pounds of a metallic compound with potential applications to nuclear projects and missile development. Kuyumcu’s arrest is only one of several that have occurred since the conclusion of nuclear negotiations, and many analysts speculate that these ongoing enforcement measures may discourage American and European countries from hastily engaging in trade with Iran.