Dubai appears to be benefiting from Washington's targeting of Iran's banking sector, which US officials say is a response to the Islamic republic's support for terrorism and its nuclear ambitions.

Banks in Dubai seem to be pickingup Iranian letter of credit (L/C) business - at handsome margins too - because international banks have pulled out of that market.

Trade restrictions

A report in a Dubai newspaper quotes former member of the Iranian parliament and president of the Tehran Chamber of Commerce, Mohammad Reza Behzadian, as saying that in the last three months new finance and trade restrictions imposed by Washington have made it difficult for Iranian entrepreneurs to conduct international business.

Bezhadin, now a businessman and a board member of one of Iran's largest textile firms, Mashad Carpet Company, told Gulf News how foreign business partners usually require Iranian firms to obtain L/Cs from international banks but points out that the US now discourages such banks from providing L/Cs to Iranian firms.

Dubai reliance

Now Iranian firms often rely on banks in Dubai for credit says Behazadian who points out that the interest rates of 10 per cent they are charged are double what Iranian businesses would normally pay.

Additionally, the Iranian businessman told Gulf News that L/Cs must be secured in US dollars even though other restrictions make it difficult for Iranian businesses to convert Iranian rials to US dollars.

Costly transaction

Behzadian says he has to exchange his rials into euros and then into dollars. A recent US$200 million L/C transaction cost him US$60,000 in foreign exchange transaction fees according to the English language daily.

"For these last three months, I've been looking for a bank to confirm an Iranian L/C, but I cannot find a bank that the seller accepts," he is quoted as saying by Gulf News, which interviewed him from his office in central Tehran.

Background

Earlier this year the US began threatening foreign banks with fines and lost business if they continued their operations in Iran in a bid to squeeze the Iranian regime (DC World News, 14 June 2006). Several international banks subsequently curtailed L/C business with Iran. The reason given at the time for this US campaign was Tehran's refusal to abandon its uranium enrichment programme.

As part of the offensive on Iran's banking sector and in a move to curb what US officials allege to be Iran's support for terrorism, the US Department of the Treasury subsequently announced that Iran's Bank Saderat would be cut off from all access to the US financial system, direct or indirect. (DC World News 18 September 2006).

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