The EU's General Court has issued judgments that could sound the beginning of a restoration of letter of credit (L/C) business between Europe and Iran.

International sanctions have substantially stemmed L/C flows between the Islamic Republic and the rest of the world.

However, if sanctions imposed by Europe are loosened or even lifted, this may have little impact on the global banking system for as long as US sanctions on Iran remain tough.

Saderat and Mellat

Over the last ten days, reports have emerged that the General Court has issued judgments that challenge the EU's justification for imposing the sanctions on two Iranian banks.

In separate judgments, the court found that there was insufficient evidence to demonstrate that either Bank Saderat or Bank Mellat was involved in Iran's nuclear programme.

Iranian reports

Several Iranian media have reported that EU sanctions on the two banks have already been lifted, but these appear wide of the mark.

EU governments have two months within which to appeal the verdicts of the EU General Court.

US sanctions

Even if EU sanctions on Iranian banks are lifted, banking analysts expect relatively little change in the position on Iran taken by major international banks - unless a change of European mood inspires Washington to loosen US sanctions on Iran's financial sector.

But the pressure appears to mounting. In a third judgment, the EU General Court has questioned the legitimacy of using the Swift payments network - which has been restricted by the EU in its operations with Iran since March 2012 - as an economic weapon.

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