Britain has recently announced plans to reopen the UK's embassy in Iran.

But while major British companies may be keen to restore business links with the Islamic republic, the reluctance of the City of London's banks to write letters of credit (L/C) and provide other financial services may make this more difficult.

Major companies

Before tough sanctions were imposed on Iran on account of its perceived nuclear ambitions, substantial Iranian positions were held by several major UK companies.

These included Royal Dutch Shell, British Airways, British American Tobacco and HSBC, all of which either had a presence in Tehran, or wrote significant amounts of business with Iran.

Financial support

The City's banks and insurers supported these and many other similar positions, but may now stand in the way of rebuilding relations.

So far, and despite the easing of sanctions, banks continue to refuse to process payments or issue L/Cs for legitimate trade deals that are not prohibited by sanctions (DC World News, 12 May 2014).

Complications

This attitude may complicate things according to a former British ambassador to Iran.

"I don't know how Iranians will feel about dealing with the City after London took such a leading role in implementing financial sanctions in 2011," Sir Richard Dalton said recently.

European banks remain reluctant to do business with Iran, especially since BNP Paribas was fined US$8.9 billion in the US, partly for handling transactions connected with Iran (DC World News, 7 July 2014).

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