BEIJING Trade between Asia and Iran is likely to slow as new United States sanctions make payments more difficult, traders said on Tuesday, although the more determined can still find a route through Middle Eastern intermediaries.
On Sunday, US President Barack Obama authorised new measures which extend sanctions to all Iranian financial institutions and require financial institutions doing business in the US to block and freeze transactions having a suspected link to Iran.
Previous sanctions had only required American banks to reject those transactions.
Asian importers of Iranian crude, fuel oil and iron ore will find the sanctions complicate payment, which already often goes through intermediaries in the Middle East.
Iran will be forced to rely more on settlement in illiquid currencies, which raises its cost of trade and adds to pressure on its currency.
Iranian cargoes I can get, thats not a problem. But how to pay is a problem, said an iron ore trader in New Delhi.
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Some Indian rice exporters already have reported defaults by Iranian customers, after a rial devaluation in January made payments more expensive for both the Iranian importers and the Dubai intermediaries, who must convert rial into dollars to transfer money back to India.
Iranian fuel oil shipments through Singapore are slowing as sanction worries deter traders, while some Iranian iron ore exporters are accelerating loadings to China for fear of even more difficulty procuring ships and payment later this month.
Irans economy is already so weakened that its oil exports are more valuable than its imports of food and consumer goods, making it difficult to offset its exports by paying for imports.
An agreement between Iran and India to settle 45% of Indian crude oil purchases in rupees leaves Iran saddled with a currency that is only partly convertible.
Iranian money, an estimated $5 billion so far, is piling up in South Korean banks as South Korean refiners continue to pay for shipments in won, which the banks cannot legally transfer back to Tehran.
We dont do money laundering with Iran and our won-denominated bank accounts have nothing to do with the toughened US measures, a Bank of Korea source said.
Only a select few Chinese banks are still willing to process payments for Iranian shipments, and those must be filtered to be sure none of the counterparties appears on official sanction lists, an exporter in China said.