China Likely to Set up New Banking System with Iran to Counter US Sanctions

Ongoing US Sanctions on Iran has restricted the nation to do business with many countries. It is believed that, things might become worse in coming secondary sanction on 4 Nov'18. The secondary sanction is likely to affect Iranian banking and insurance sector. Many foreign banks has already suspended their business with Iran.

Recently, China's Bank of Kunlun has announced that it will not guarantee its banking ties with the Islamic Republic of Iran as of the beginning of November due to the US re-imposition of sanctions against Iran. In order to safeguard the transaction between the nations, China intends to launch a new banking system to continue financial and banking cooperation with the Islamic Republic of Iran.

Iranian Chamber of Commerce, Industries, Mines and Agriculture based in China has recently met Iranian and Chinese officials and called for defining their demands within the framework of the new system, provided that problems facing Bank of Kunlun should be removed in this newly-devised system.

Setting up substituted structures by China may last for a long time and for this reason, it is predicted that this new system will be postponed to coming year in 2019. It is to be noted that China and Iran has been indulge in steel raw material business with each other.

China is one of the major importer of Iranian iron ore, the nation has imported around 21 MnT iron ore from Iran during the last Persian year. The nation has already imported around 13 MnT in the first 7 months of current Persian year (21 Mar- 22 Oct'18).

On other hand, Iran is one of the largest importer of graphite electrode from China, the nation has imported 0.6 MnT GE from China in last Persian year, this year Iran has already imported 0.4 MnT GE till Jul'18. This new banking system is likely to eradicate the trade barriers in terms of bank payments among both the countries.

Inputs from Mehr News