More details have emerged about the alleged US$2.8 billion letter of credit (L/C) fraud that has rocked the government of Iran's President Mahmoud Ahmadinejad.

The scandal centres on Ahmadinejad's ally, the businessman, Mah Afarid Khosravi, who allegedly forged L/Cs with the support of state-employed bankers and government officials.

New L/C policy

One immediate impact on Iranian L/C business is that the authorities have now banned the private sector from opening documentary credits unless one of the parties is the state.

It has now emerged that nearly 140 forged or unregistered L/Cs valued at around US$2.8 billion were employed in the alleged scam.

The L/Cs were allegedly prepared in cahoots with the support of senior employees at the part state-owned Bank Saderat.

Fake documents

The fake documents were then given to seven other banks to fund some 40 companies and to try to buy a large state-owned steel factory.

Conservative hardliners in parliament opposed to Ahmedinajad's government have sought to gain political capital out of this scandal, but with only limited success.

Political battle

Iran's legislature decided in October to start impeachment proceedings on economy minister Shamsoddin Hosseini (DC World News, 26 October 2011).

These proceedings have now failed and the minister will not be impeached after all.

Dozens of people, including senior bank officials and one of Iran's top businessmen, were already being investigated for their roles in the suspected frauds (DC World News, 11 October 2011).

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