Angela Jameson, Steve Hawkes and Suzy Jagger
Lord Lamont of Lerwick, the former Conservative Chancellor and the chairman of the British-Iranian Chamber of Commerce, said: I think the Iranian banks will find it very difficult to clear their US dollars in the City. This is quite a tricky issue.
His comments came after Washington imposed harsh sanctions on the Iranian Defence Ministry and three state-run banks in a move that is expected effectively to paralyse the countrys banking system.
Lord Lamont also accused Henry Paulson, the US Treasury Secretary, of jawboning European banks. What I think is a little unfortunate is threatening people who are acting within the law . . . European banks with branches in America shouldnt have their business interfered with in Europe by America.
Trade between Britain and Iran is relatively small, with UK exports to Iran totalling £362.5 million in the first ten months of last year, the latest period for which figures are available. Exports are down on 2005 by about 4 per cent, a fall that is attributed to the impact of US sanctions on Irans bilateral trade with other countries in the past 12 months.
Iran is Britains fifth-largest market in the Middle East and North Africa for direct exports. However, about 15 to 20 per cent of the UKs exports to Dubai are then shipped to Iran. Taking these into account, Iran is Britains fourth-largest market in the area.
The number of leading British companies operating in the region has shrunk to a handful. However, one British business is defying international tensions over Iran and embarking on business with the country this weekend: tomorrow Bmi, the UKs second-biggest scheduled airline, will become the only British carrier to fly to Tehran.
The airline is undeterred by the possibility of sanctions, or the timing of its inaugural flight, on a route previously flown by a British Airways franchise operator.
Bmi said that its daily flights were expected to be filled primarily with business flyers and their visiting friends and family: We have considered all the risks, in the way that we would starting any new service.
Michael Thomas, director-general of the Middle East Association, which arranges trade visits to the region, said: For British firms in Iran, at the minute its like pushing water uphill. Its very hard to find a bank that will take a letter of credit, and companies are having to do barter deals with Chinese firms to get paid.
If youre a big supplier in the US and you value that business you are not going to risk that business to supply Iran, he added.
Iran has got everything Turkey has, plus oil and gas, but its still way behind. At the end of the day, its a market with huge potential, and thats a frustration for Iranian businessmen as well as British businessmen.
Despite the difficulties of conducting business there, Mr Thomas believed that sanctions were preferable to conflict. A war would backfire, but if theres a drip, drip effect and if the standard of living goes down, it will implode, he said.
Shell has come under intense pressure to scrap a £5 billion natural gas project in Iran after a call from a group of leading American pension funds for energy companies to cut their ties with the country.
Influential American institutional investors wrote to Shell and seven of its leading rivals, including Gazprom and Total, in the summer telling them that there was an increasing risk that sanctions imposed on Iran would affect their businesses. The funds are concerned that infrastructure developed by Shell could be targeted in any future war.
Peter Voser, Shells finance director, said yesterday that the oil major was still working on the technical specifications and economics of its potential projects in Iran. We shall not take a final investment decision to move forward until all this prework has been satisfactorily completed. Once we get to that point, we shall take the economic, technical and also the political dimension into our decision, Mr Voser said.
The US Securities and Exchange Commission recently put Shell on a list of companies that were working in state sponsors of terrorism countries. Shell said that its activities in Iran were transparent and information on them was fully available to investors.
British-American Tobacco, one of the British-Iranian Chamber of Commerces sponsors, said that it had faced no pressure from investors to withdraw from Iran.
The tobacco group, which has a small joint venture in the country, producing cigarettes with the local state tobacco monopoly, said that it would monitor the situation. If the British Government decides to do something similar [to the US Government”>, then we will have to abide by that, a spokesman said.
HSBC, the biggest foreign bank operating in the Middle East, said that it had a small representative office in Tehran that has no deposit or clearing facilities. The office is a meeting place for our clients overseas, a spokesman said.
Iran by numbers
65.4m total population
$8,700 GDP per capita
15% unemployment rate
40% below poverty line 12% inflation rate
Source: CIA World Fact Book
