Petrochemical suppliers in Iran are strengthening their internal financial processes and contemplating direct letter of credit (L/C) transactions in preparation for the anticipated easing next year of sanctions imposed on the Islamic republic.

The suppliers are expecting sanctions to be eased during the first half of 2016.

SWIFT access

In July 2015, Iran agreed with world powers to curb its nuclear programme, concerns over which had prompted the US and the EU to impose strict sanctions, which included barring Iranian banks from the SWIFT messaging system.

This substantially curbed Iran's ability to export crude oil and petrochemicals as the lack of SWIFT access meant they could no longer accept L/Cs and bank transfers from buyers nor could they make payments to international partners.

Current arrangements

Iranian suppliers are currently forced to receive payments indirectly from buyers via international bank accounts in the financial hubs of Dubai, Hong Kong and Shanghai.

This means it can take from four days to two weeks for payments to be transferred from the buyer to the seller.

Uncertainties will remain

Hoping for a return to the SWIFT network by the first half of 2016, Iranian petrochemical companies have started setting up new accounts with local banks for various export markets, industry sources reportedly said.

But the suppliers are aware that uncertainties remain over when the sanctions will be lifted.

Moreover, some specific sanctions will remain on Iran's financial sector until US legislators vote to end them.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.