(Adds ICPAC chairman comment in eighth paragraph)
By Stelios Orphanides
The unilateral decision of US President Donald Trump to withdraw from the nuclear agreement struck by Iran and the five permanent members of the UN Security Council and Germany and the EU three years ago may negatively impact Cyprus’s tentative efforts to exploit opportunities in the south Asian country, a business group leader said.
“We have made serious efforts to help the Cypriot business community find opportunities in Iran,” said Michalis Antoniou, director general of the Federation of Employers and Industrialists (OEV) in a telephone interview on Wednesday, a day after Trump announced his decision.
“We organised trade missions in 2016 and 2017 that led to agreements and transactions, after overcoming difficulties related to banking. It is a market we consider promising for many sectors provided there is political stability”.
Antoniou said that Trump’s decision is likely to close a window of opportunity for Cypriot companies “to more than 10 sectors of the economy,” including shipping, hospitality, legal, fiduciary and accounting services, that participated in the trade missions. He also added that Cyprus should also take into account its ties to Israel, which considers Iran a threat to its security.
As expected, apart from the business interest in Iran, the lifting of UN sanctions in early 2016 led also to other forms of cooperation, even at government level.
Cyprus and Iran had already signed a double taxation avoidance treaty in August 2015, which came into force in March last year.
The decision of the US President who had declared his intention to scrap the agreement during the 2016 campaign, has widened the rift between the US and its European allies who said they will stick to the provisions of the deal that aims at preventing Iran from developing nuclear weapons.
Already, the Institute of Certified Accountants of Cyprus (ICPAC) which also supervises accounting firms notified its members about the need to remain informed about sanctions imposed by the UN, the US and others, and to fully comply with them, its chairman said.
“There was a certain euphoria that trade with Iran would commence that would give the economy a boost,” Marios Skandalis who chairs ICPAC and is also head of Bank of Cyprus’s compliance division said. “It turned out a pipedream. The only thing we now miss is waiting for something to happen”.
Still, the Cypriot banking sector opted for a wait-and-see approach instead of rushing into Iran after the sanctions were lifted. Even today, more than two years later, Cypriot lenders do not open accounts to Iranian nationals. According to Skandalis, the sanctions lifted concerned “political sanctions” while those concerning transactions in US dollar remained in place.
“With respect to Iran, we followed the Americans,” the spokesperson said in reference to the additional scrutiny of transactions carried out in US dollar via foreign correspondent banks. “It was as if we had a parallel central bank which was even stricter than our supervisor”.
The Cypriot banks’ reluctance to engage in business with Iran on concerns they could expose themselves to additional money laundering risks, led to complaints at political level which in turn prompted the Central Bank of Cyprus to advise lenders that it was up to them to decide whether to engage in Iran business after evaluating the risks, while always sticking to the law.
Michael McBride, a Limassol-based lawyer, explained that Trump’s decision may have further ramifications.
“It does not only discourage business with Iran but also transacting in US dollar,” he said. “There are already banks abroad which simply do not do dollar transactions”.
According to Cystat, the volume of bilateral trade in 2016 did not exceed €7m broken down to €6.1m in exports and €626,000 in imports. The number of visitors from Iran in 2016 and 2017 was 5,328 and 6,502 respectively.