UK, US and Europe find ways around restrictions

As elections loom in Iran this week, British, European and US firms are trading with the country through "front companies" in Turkey, Russia and other countries to get around strict sanctions imposed on the state of some 70 million people.

The former British chancellor of the exchequer Lord Lamont says the trade restrictions against Iran are counter-productive. Jeff J Mitchell / Getty Images
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British, European and US firms are trading with Iran through "front companies" in Turkey, Russia and other countries to get around strict sanctions imposed on the nation.

While sanctions have tightened, the former British chancellor of the exchequer, or finance minister, Lord Lamont, the chairman of the British-Iranian Chamber of Commerce (BICC), a trade group based in the United Kingdom, says the restrictions are counter-productive.

"The effect of sanctions is to hit the private sector in Iran, drive companies bankrupt and drive them in the arms of the government, or into the hands of the Revolutionary Guards," he told the BBC.

According to the BICC, in 2011, UK exports to Iran fell by 37 per cent compared with 2010 as sanctions bit harder.

Iran has inflation of 32.2 per cent, compared with an average of 2 per cent in Europe and the US. To make up for a shortfall in oil revenues, taxes on businesses were raised by 30 per cent last year, with similar hikes set for this year.

While most sanctions get tighter, the US has actually relaxed an embargo on the sale of computers and mobile phones, in a bid to help Iranian dissidents.

The European Union has imposed restrictions on cooperation with Iran in foreign trade, financial services, the energy sector and technology, and banned the provision of insurance and reinsurance to Iran and Iranian-owned companies.

Many refineries in India, for example, where Iranian oil was processed, were insured by European companies.

An oil embargo between the EU and Iran was agreed in January last year.

Nigel Kushner, a lawyer and expert on trading with Iran, says many large British companies can legitimately channel sales through subsidiaries in other countries, including Turkey and Russia, that have no sanctions against Iran.

Smaller companies are more likely to use Iranian money exchanges - which take a cut of the transaction. Payments made in Iran are matched to payments made in another country.

"Many large exporters and manufacturers have now pulled out of the country but a decent number have persevered," says Mr Kushner.

"A lot of business is absolutely legitimate - as long as it is not oil or petrochemicals there is no reason why you can't continue to trade."