Importers of petrochemicals from Iran are finding several ways to overcome the problem of not being able to use letters of credit (L/Cs) to buy Iranian products.

According to a report by energy analysts, Platts, importers are resorting to using bank cheques, direct remittances, escrow accounts and informal money exchange hawala transactions with Iranian sellers.

Poll of traders

Platts polled traders across the Middle East and Asia said that they used various payment methods to bypass the L/C shortage.

In Dubai, where banks have become cautious about opening L/Cs from Iran, traders are reporting that solutions such as payments via hawala or through an escrow account are being used.

Dubai based traders say Iranian products are sufficiently cheap to make it worthwhile using riskier or more expensive transaction methods.

L/Cs still available

The poll reveals that in some parts of the world it is still possible to use L/Cs for purchases from Iran.

An Iranian trader based in China reckons he has found solutions to keep trading with his homeland.

"The Bank of China had earlier stopped opening our L/Cs, saying that some of their US-based investors objected to the bank doing business with the Iranians. But there are several other banks in China eager to deal with us," he told Platts.

Indian availability

The poll also revealed that in India, while private banks are wary of opening L/Cs from Iran, government banks are still open for business.

The L/Cs are denominated in euro or yen instead of US dollars and while financing cargoes has become difficult, it is not impossible according to a source quoted by Platts.

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