Swiss businesses are ready for Iran, but banks aren’t

Banking relationships between Iran and the rest of the world remain difficult due to sanctions that still exist from the United States AFP

Swiss businesses are eager to get a foothold in the Iranian market now that most trade sanctions have been lifted, but restrictions still in place from the United States are creating major money transfer problems.

On a Tuesday afternoon in Bern, a hotel conference room is packed with business representatives from the region who want to learn more about selling their products in Iran. Participants sit up in their seats and murmur their interest as several speakers tell them about the opportunities that abound in the Iranian market: massive infrastructure projects waiting to be built, a huge and young middle class waiting to buy things, and a desire for high-quality products after being forced to buy largely from China during 12 years of tough sanctions.

But reality hits when a representative from Bern’s cantonal bank gets up to answer a key question: how is the situation looking for businesses who want to transfer money from Iran to Switzerland, or vice versa?

“The situation looks bad,” he said frankly. “We follow international financial rules and we have been told to wait. At the moment, I don’t see many opportunities to make payments to Iran.”

Caution reigns

Swiss banks aren’t taking any chances, according to Suhail El Obeid of Switzerland Global Enterprise (S-GE), which co-organised the event along with canton Bern’s trade and industry association.

El Obeid said that when someone at a similar event recently tried to pay their CHF60 ($63) participation fee by bank transfer with the booking text “Iran”, the Swiss bank concerned turned down the transaction.

“You can’t just go to a Swiss bank and say, ‘I want to transfer money from Iran’,” he said, noting the issue’s sensitivity.

Touraj Etezady, who has done business in Iran together with the Marti construction group, agreed that “unfortunately financial transactions are very difficult” and that this was an issue raised many times when a delegation of Swiss politicians and business leaders travelled to Iran in February along with Economics Minister Johann Schneider-Ammann.

The banks’ fears are not unfounded. BNP Paribas was handed an $8.9 billion (CHF8.5 billion) fine last year by US justice authorities for breaking sanctions with Iran, and Credit Suisse was fined $536 million in 2009 for dealings with Iran that the Americans considered to be financing of terror organisations. What’s more, Swiss banks are still smarting from billions of dollars in fines issued by the Americans over tax evasion issues.

Daniela Flückiger of the Swiss Bankers’ Association (SBA) told swissinfo.ch that given such factors, it makes sense that financial institutions are cautious when it comes to doing business with Iran.

“Banks respect international sanctions, so if they get into a market less quickly than other sectors, that’s understandable,” she said, adding that the SBA doesn’t give any parameters or recommendations to banks about which countries they should operate in.

Complex discussions arise

The remaining sanctions can also create complicated scenarios for Swiss companies with any US dealings such as an American affiliate or branch.

When asked about those sanctions, Gina Schmied, deputy head of the sanctions unit at the State Secretariat for Economic Affairs (SECO), said at the S-GE event that companies should double check possible implications of international measures. 

She highlighted that, for example, exporting goods of US origin to Iran or the involvement of US persons in any financial transaction involving Iran can be affected by American sanctions. Remaining sanctions can also impact transactions made to or from Iran in US dollars.

Today, most business transactions between Iran and other countries are made in Euros.

Many of the business representatives gathered in Bern said they were simply testing the waters and had not yet established any Iranian relationships. That was the case for Markus Hauri, who operates a real estate management company. He attended the event for information-gathering purposes but didn’t expect the extent of the restrictions still in place.

“I was surprised by how strongly the remaining sanctions in place from the United States continue to put the brakes on Iran’s development, and how afraid the whole of Switzerland still has to be of the US,” he said. “It’s almost mafia-like.”

However, thanks to Switzerland having lifted some Iran sanctions in 2012, other Swiss companies already have a foot in the door and are eager to continue to grow their opportunities – especially once the banking issues are resolved.

“I never thought the market potential was so big,” said Elena Amsler, responsible for Iranian business relations at the Swiss firm Helmut Fischer, which has been exporting to Iran since 2012. “It was good to hear that there are so many opportunities – we’ll keep going after them.”

But she has to tread lightly, checking every detail against the restrictions still in place.

“I’m constantly confronted with the realities of the remaining US embargoes, be it by the banks, a transport firm or a courier.”