A joint venture between Tehran-based Middle East Bank (MEB) and Mumbai-based IndAsia Fund aims to explore trade and investment opportunities for Iranian and Indian businesses if sanctions on the Islamic republic are eased at the end of June.

MEB-IndAsia Corporate Advisors (MICA) aims to find innovative financing solutions for trade and investment involving the two countries, based on the assumption that conventional letter of credit (L/C) and other bank services will remain in short supply, even if sanctions are lifted.

Idle funds

A statement issued by the joint venturers suggests that Iran has US$8.8 billion of interest-free funds lying idle in India because of the sanctions.

These funds could possibly be a source for foreign direct investment in India that the new venture hopes to tap according to MICA.

International banks

MEB was co-founded by Parviz Aghili, a US-educated Canadian citizen who appears convinced that international banks will have little appetite for Iranian business even if sanctions are eased. International banks are risk averse he says. "They understand and tell us that the rules and regulations are there. But they say the expected return is not enough to justify the risk," he said in a recent interview with Reuters.

Aghili told the news agency that another reason MEB had been established was to address the difficulties of obtaining L/Cs for trade with Iran.

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