Iran’s bankers wait for Trump’s next move

Olivier Holmey
Published on:

Immediately after Donald Trump’s election victory, Euromoney visited Tehran to gauge the reaction of one group likely to be affected more than most – Iran’s banking community. Throughout his campaign Trump threatened to tear up the nuclear agreement that has allowed Iran to take its first tentative steps towards international rehabilitation. But bankers in Tehran are determined to hold on to their hard-won gains.

Trump Rip-600
Illustration: Morten Morland

"I have no knowledge of US politics, to be honest," he says, wryly, as he reclines in his chair. "But my understanding so far is: Democrats say something, do something else and stab you in the back. With Republicans, it’s two ways – war or business. 

"Jimmy Carter, Bill Clinton, Barack Obama: these are all complicated people with complicated solutions," he continues. "They never resolve issues. At least, with Republicans, we have a clear picture."

This is the view of a senior Iranian banker in his office in Tehran, as he tries to make sense of Donald Trump’s imminent accession to the White House.

Trump’s election is of vital significance to Iran’s banks because he has vowed to undo the nuclear deal signed last year, which removes nuclear-related sanctions on Iran and its banks in exchange for limitations on the country’s nuclear programme. The deal, the Joint Comprehensive Plan of Action (JCPOA), was ratified by Iran, the permanent members of the United Nations Security Council (the US, China, Russia, France and the UK) as well as by Germany and the European Union. It has also been endorsed by a UN resolution. 

By promising an end to the decade-long international dispute over Iran’s alleged quest to build a nuclear arsenal, the deal raised hopes among Iran’s banks. After years of sanctions that stopped them conducting international transfers, Iran’s banks would finally be able to reconnect to the global financial network. Banks’ revenues looked set to soar as conventional payments for trade between Iran and the rest of the world would finally resume.

But during his campaign, Trump repeatedly derided the nuclear deal, calling it: "The worst deal I think I’ve ever seen negotiated", "that horrible deal" and "one of the worst deals ever made by any country in history".

Trump elaborated: "When I look at the Iran deal and how bad a deal it is for us. It’s a one-sided transaction where we’re giving back $150 billion to a terrorist state, really, the number-one terrorist state. We’ve made them a strong country from, really, a very weak country just three years ago." (The figure of $150 billion is the high end of estimates for frozen Iranian assets, not all of which are being released under the JCPOA.)

He has said the nuclear deal was: "The stupidest deal of all time, a deal that’s going to give Iran, absolutely, nuclear weapons", and he has vowed to "dismantle" it. On one occasion, he said ripping up the deal was his "number-one priority". 

But Trump has not been consistent in his attacks on the deal. He has, for example, said that he would not rip it up but renegotiate it and suggested that he disliked it not so much because Iran was reaping economic benefits from the deal, but rather because the US was not.

After years of hardship brought about by sanctions, Iranians have come to understand the stark consequences US foreign policy can have on their lives. The country’s bankers sense Trump is not one for slow, technocratic redirections in policy, as the Democrat Hillary Clinton, his main presidential rival, might have been. 

So which will it be, they wonder: business or war?

Open question

When Euromoney visited Tehran just after the US election, the city was abuzz with talk of Trump. But its residents were still going about their daily business and no one had taken to the streets to protest his repeated affronts to Iran. The Tehrani traffic was still heavy enough to produce a thick smog, which only the season’s first snowfall was able to clear. Around the bleached city, bank headquarters still filled with people in the mornings, while on the streets, black-market dealers still congregated to trade foreign currencies.

In mid November, as news of Trump’s win was sinking in, Tehran’s bankers began to ponder what it might mean for them. 

One of those who receives Euromoney is Ali Ashraf Afkhami, the chairman and managing director of state-owned project finance institution Bank of Industry & Mine. His vast office, which overlooks the mountains that bound Tehran to the north, is decorated with pictures of Iran’s supreme leader Ali Khamenei, including one of the two of them shaking hands. 

Ali Ashraf Afkhami-600
Ali Ashraf Afkhami, chairman of Bank of Industry & Mine

Afkhami speaks enthusiastically about the progress his bank has made since the implementation of the nuclear deal on January 16.

But the subject of Trump soon comes up, when Afkhami explains internal US politics represent a threat to Iranian banking.

"Some political barriers still exist," he says. "We have to wait and see what’ll happen with new policies in the US, which is very important."

Of future relations with the US, Afkhami says: "It’s better to work together; we have to learn to work better together. We’ve achieved a lot, but can achieve a lot more."

Whether or not Iran will be able to work better with the US, is, with Trump about to take office, and Republicans in control of Congress, an open question. 

Most bankers say they struggle to get to grips with what his positions really are.

"I have been following the election closely, because it is related to our job," says a senior banker at one of the country’s largest private-sector banks. "We have found that Mr Trump is very unpredictable. Sometimes you think: 'That is good, it will work out’, sometimes you think: 'It is not good’. We don’t know what is going to happen."

Another banker echoes that point: "Now we understand generally what is the approach of the Republicans, but we do not understand what the new approach of Trump is." 

Whereas Trump has contradicted himself on the JCPOA, the Republican Party, under whose banner he ran, has consistently opposed it.

A third banker says this lack of clarity is an issue for Iran’s banks. Frustrated, he asks: "What will be the policy of the most powerful country in the world, which influences the whole world?"