The costs of U.S. sanctions to the Iranian economy are devastating – even before the next wave takes effect on November 5.
The International Monetary Fund warned in October that the Iranian economy may shrink by 1.5 percent this year, compared with a forecast for 4 percent growth in May, before the new U.S. sanctions were announced. Next year, economic output could decline by 3.6 percent, the IMF said.
In August, the Swiss train manufacturer Stadler Rail abandoned a billion-dollar agreement to build 960 underground carriages in Iran. Stadler has a U.S. subsidiary that would be liable to penalties under the US sanctions.
“Doing business is tough,” says Fundel, whose St. Gallen-based company, 4bridges, exports Porsche Design computers to Iran. “The Iranian rial has plummeted against the dollar. Things will certainly get even more difficult for Iran if there is a lack of income from oil sales.”
The November wave of U.S. sanctions is expected to include banks, and is likely to interrupt traditional payment channels for companies doing business in Iran. The European Union has said it is determined to protect its companies from U.S. penalties while ensuring that they can continue to operate in Iran. It has already passed a “blocking statute” allowing EU operators to recover damages arising from the sanctions from the person causing them and forbidding EU citizens from complying with them.
Among the measures the EU is discussing is a Special-Purpose Vehicle that would circumvent sanctions by operating independently from the U.S. banking system. It would create a kind of barter system under which, for example, payment for an Iranian oil delivery to one country could be covered by machinery exported there from another.
Blockchain Solutions
Fundel says he expects Switzerland to benefit from these measures too.
“We are entering the age of digitalisation where decentralized ecosystems are becoming available, and the EU is looking for solutions without involving the U.S. financial system, the U.S. dollar and U.S. citizens,” Fundel says. “There is an exchange of views over Iran between the EU and Switzerland. Switzerland is famous for its decentralized system and Switzerland has blockchain companies that can contribute to the SPV. If Swiss banks can bring their local advantages into play, then the EU will be open to that.”
Fundel’s company is still able to continue business in Iran as products are eligible for a general licence from the U.S. government and his company is linked to a strong compliance and “know your customer” datapool. But he is also examining alternative methods of payment, including blockchain, to bypass the need to use the international banking system and SWIFT. “With blockchain, you don’t need banks to transfer currency,” Fundel says. “The risk is also much lower that a payment wouldn’t arrive than with other current solutions.”
He advises any Swiss companies considering trade with Iran to join the Swiss-Iranian Chamber of Commerce and Industry. “We are offering a trip to Iran for companies in November,” he says. “You get an insight, you visit a local company, you get to know business people and the city of Tehran, and you can see whether it appeals.” On the bright side, he says, “Swiss products and services and Swiss precision are very highly valued in Iran.”
