China's Bank of Kunlun Resumes Iran Business

EghtesadOnline: The main Iran-China banking channel is functioning after China's Bank of Kunlun resumed services for Iranians on Monday, deputy president of Iran-China Chamber of Commerce and Industries said.

News ID: ۷۴۶۳۲۴

11 December 2018

Majid Reza Hariri told the Financial Tribune that China was resuming banking ties with Iran after it received waivers from the United States to import Iranian oil last month, but the process was delayed to iron out the details.

"I can confirm that Bank of Kunlun is now handling payments for Iran's oil payments and is functioning like the Special Vehicle Purpose that Europe is trying to set up for Iran," Hariri said.

Bank of Kunlun, which was established to help facilitate Iranian trade, will now deposit Iran’s oil export receipts in an escrow account and Tehran can use that account to import goods from China.

"Iranian importers and merchants can also have access to Kunlun Bank," he added.

Bank of Kunlun was established in 2006 as a commercial city bank in Karamay. The bank was later selected by the government in Beijing as its main bank to process oil payments to Iran, shielding other banks from penalties under western sanctions between 2010 and 2015. The US Treasury sanctioned Kunlun in 2012 for conducting business with Iran.

After the US re-sanctioned Iran last month, Bank of Kunlun was forced to cut ties with Iran. Subsequently, it notified Chinese exporters to conclude any unfinished business they may have with Iran before Nov. 1 because the bank would no longer "guarantee" that payments could be handled after that date.

In early November, Swift, the financial messaging service that links thousands of banks around the world, announced that it would disconnect certain Iranian banks from its network. Calling the step “regrettable”, Swift said it had taken it “in the interest of the stability and integrity of the wider global financial system.”

Most observers interpreted the move as Swift falling in line with the US’s increasingly hostile policy against Iran.

Hariri, however, admitted that banking problems of Iranian expatriates and students in China has not been solved. He expressed the hope that as Iran's ties to the Financial Action Task Force improves those obstacles would also ease.

The anti-money laundering authority FATF announced last month that Iran has until February to complete reforms that would bring it into line with global norms or face consequences.