Iran is gearing up to do significantly more business on letter of credit (L/C) terms now that international sanctions on its banks have been substantially lifted.

They were lifted after the International Atomic Energy Agency (IAEA) confirmed Iran's compliance with the agreement on its nuclear programme and implementation of the Joint Comprehensive Plan of Action (JCPOA) became effective.

L/C focus

Deputy governor of the Central Bank of Iran, Gholamali Kamyab, says a huge number of L/Cs were opened on the first day of implementation of the JCPOA, even though many of the world's banks were closed for the weekend.

"Now, we have over 1,000 L/Cs waiting to be accepted by international banks," according to political commentator with reportedly close ties to the government, Hamidreza Taraghi.

SWIFT move

A resumption of L/C business between Iran and the rest of world has been facilitated by SWIFT's announcement that Iranian banks can now reconnect to the SWIFT international payment system.

SWIFT's services will be limited in terms of certain services however because not all restrictions imposed on the Iranian banks have been lifted.

It would still not be able to provide certain financial messaging services to Iranian banks under EU sanctions, because these remain in place under EU regulations.

Oil prospects

One area where increased L/C business can be anticipated is in exports of Iranian oil. Iran expects to sell 500,000 barrels a day (b/d) of crude, adding to the approximately 1.2 million b/d being produced globally.

Iran's oil minister, Bijan Zangeneh, says the Islamic Republic aims to ramp up oil production, eventually to its pre-sanctions capacity of 4 million b/d.

"Iran is determined and will be able to fulfill its wish to increase the export of oil and gas, even if the oil price drops to US$5 per barrel," energy analyst, Farshad Ghorbanpour, told local media.

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