Some smaller banks are still providing letters of credit (L/Cs) for legitimate trades with Iran.

Other small banks are offering more complex trade products, while all of the banks in this shrinking market can charge premium rates for their services.

Deserted market

The smaller banks are stepping into an L/C market now largely deserted by the world's major banks. They backed out of the market two years ago as a result of international sanctions.

This left the way clear for Gulf Arab banks to service L/C trades with Iran until last year, when the US pressured even these financial institutions to reverse out of the market too.

Authorised L/C trades

One bank that has stepped into the breach and is reportedly supporting L/C trades with Iran is Geneva-based Hinduja Bank (Switzerland) Ltd.

It handles Iranian food transactions for Swiss companies. It is reportedly working with the Swiss government on authorised trades involving L/Cs and bulk agricultural commodities.

Premium prices

According to one banker, financial institutions prepared to support trades with Iran can charge premium prices.

These are estimated to be around six per cent higher than prices charged for conventional trade finance products.

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