By Stelios Orphanides
The decision by world powers to lift sanctions against Iran after the isolated South Asian country complied with the terms of a July nuclear deal, offers Cyprus important opportunities which the island has to cautiously exploit, people interviewed by the Cyprus Business Mail have said.
According to a source at the ministry of foreign affairs, all sanctions previously imposed in order to discourage Iran from continuing its nuclear programme have been lifted while other sanctions related to its ballistic missile programme will be reviewed in the future. Sanctions related to human rights violations which target specific individuals remain in place.
The sanctions lifted include banking and financial transactions, insurance, oil and gas trade, shipping and transport, trading of Iranian coins and gold, the source said. “There still remain some restrictions in cases requiring a previous approval by authorities involved,” related to “sensitive goods and technologies linked to the proliferation of nuclear weapons,” the source said.
Theo Parperis, a managing partner at PricewaterhouseCoopers in Nicosia, said that the lifting of the sanctions offers Cyprus prospects for new business. Investors in the Asian country will be able from now on to invest outside Iran while foreign investors will be able to do the same in the country, and in both cases via Cyprus which in August signed a double taxation avoidance treaty with Iran, he said.
“The European Union would also favour Iran carrying out business with Europe via countries such as Cyprus, given that Cyprus is strategically located in a region, facilitating such a role,” Parperis said in an interview. “U.S. companies would also welcome the lifting of sanctions against Iran as they anticipate engaging in partnerships with Iranian counterparts. There are serious and large state-owned and private companies in Iran, as the country had carried out over the last few years a limited but successful privatisation programme”.
Michael McBride, a lawyer at the Limassol-based Chrysses Demetriades law firm, which specialises in providing legal services to shipping companies, said that alone the prospect of lifting sanctions against the Islamic Republic may have led to exploratory contacts between the entrepreneurs in Cyprus and Iran.
“There is no doubt that unofficial talks have been taking place already by various parties,” McBride said. “Generally, Iran is a large market and Cyprus is one of the better-placed EU countries to offer a stable and specific legal and business environment for Iranian companies to establish an EU presence”.
The shipping sector, also affected by the sanctions as the prevented companies from selling naval equipment and other related services, may benefit from the lifting of the embargo, while Cyprus’s banking sector may take advantage of new opportunities by capitalising on its flexibility, the former chairman of the Cyprus Shipping Council Eugen Henning Adami said.
“We have a good, flexible business oriented banking system,” Adami said. “And here we have advantages compared to other major, traditional banks like Deutsche Bank, HSBC. New business is difficult (for them) when there is no precedence”.
Europe’s major banks are unable to rely on existing procedures to create new business with Iran as they lack precedence and can’t say ‘let’s use paperwork from a previous case’ for this purpose, the German-born skipper said.
“Everything has to be created from scratch including risk evaluation,” he said. “If you want to do something like that with a major bank, it’s almost impossible. Cypriot banks have an advantage here”.
Adami, who is a member of the shipping business group and owner of the Limassol-based Mastermind group which owns and manages ships, also cautioned about probable risks in dealing with Iran, a backer of Lebanese militia group Hezbollah.
“What Cyprus can do, is simple: Cyprus has to apply EU guidelines,” he said. “It shouldn’t implement a Cypriot agenda but instead a European Union agenda with respect to Iran”.
Risks related to engaging in transactions with Iran exist “but they are manageable,” he said.
Therefore, “when new business is agreed, Cypriot ship-owning companies or the Cypriot government have to carry out a due diligence and take into account with whom they do business,” Adami added.
Parperis, the PWC auditor, said that risks related to Cyprus’s banking system being accused of facilitating money laundering are slim.
“The review of Cyprus’s anti-moneylaundering practices carried out in 2013 as part of the memorandum with the EU showed that we have a good framework in place,” he said. “Cypriot banks now have some of the strictest procedures with respect to money laundering regulations. It is now more difficult to set up an account at Cypriot banks than at banks in some other EU countries”.
Cyprus, which was accused in the foreign press ahead of its 2013 bailout of helping Russian business people launder money earned in Russia, is “playing a fair game in the chase of international business,” as demonstrated by the “clean test” subsequently underwent, he said.
McBride, the Limassol-based lawyer, also added a word of caution.
“As Cyprus is aligned with the West it is clear that it has to be careful when dealing with Iran,” he said. “On the basis that the commercial and cultural ties to be established are within similar parameters of the G7 countries, then there should be no cause for concern”.