Baku, Azerbaijan, Oct. 12
By Farhad Daneshvar – Trend:
A recent decision by the Office of Foreign Assets Control (OFAC), which is a part of US Department of the Treasury, is extremely good news for the Iranian economy, a US based economist believes.
“It will facilitate international financial transactions for Iranian companies and entities as long as they ‘do not involve, directly or indirectly, the United States financial system or any United States person, and do not involve any person on the SDN List’ [the sanctions list of Specially Designated Nationals],” Kamran Dadkhah, an associate professor at the Department of Economics in the US-based Northeastern University, told Trend on Oct. 12.
The Treasury Department on Oct. 7 released new guidelines for dealings with Iran, loosening restrictions on the country’s ability to trade in US dollars.
Given that the US dollar is an international currency, this is a great opening for Iran, Dadkhah said, adding that without such a facility any transaction with Iran, particularly an investment, would have been risky and difficult.
In its new guidelines the Treasury said, “It is not necessarily sanctionable for a non-US person to engage in transactions with an entity that is not on the [sanctions list] but that is minority owned, or that is controlled in whole or in part, by an Iranian or Iran-related person on the [list].”
“But it should be noted that the main obstacles for economic prosperity of Iran are the structural problems of the economy that are often referred to as ‘the Mafia economy.’
The government of [Iranian President] Hassan Rouhani has not taken any major steps to correct this situation,” said Dadkhah.
The new guidelines allow deals with firms that are not under sanctions, but the rules still restrict entry of transactions into US financial system.
Dadkhah further touched upon the impact of the decision on Iran’s capital market, saying in the case of Tehran Stock Exchange (TSE), the effects will be positive.
“Iranian stock values are mostly affected by uncontrolled inflation and the very high rate of interest. The lowering of the interest rate (referred to as banking profit) has had and will have a positive effect,” he added.
Commenting on investment risks in Iran, he stated that the new OFAC guidelines will reduce the risk for foreign investors, because they won’t be fearful of being fined (usually in high amounts) for breaking Iran’s sanctions.
“But they will still be cautious given the structure of Iran’s economy and rather arbitrary decisions by the government and organizations affiliated with the Revolutionary Guards and religious organizations,” Dadkhah added.
Meanwhile, there are some others in Iran who express pessimistic opinions over the US Treasury Department’s decision aimed at relaxing rules on foreigners doing dollar-denominated transactions with businesses in the Islamic Republic.
Hossein Ghazavi, deputy minister of economy for banking affairs, had earlier said that US Treasury Department’s recent guidelines are not expected to lead to tangible changes in relations with international banks.
Although the nuclear related sanctions on Iran were lifted following the implementation of the Joint Comprehensive Plan of Action on January 16, Iran still has difficulty establishing banking ties with leading European banks as they are worried about running afoul of US regulations.