Switzerland expands trade relations with Iran
Despite years of sanctions, Switzerland has managed to maintain good trade relations with Iran. With the recent approval by the Iranian parliament of a transport agreement between the two countries, goods and passenger transport will receive a boost.
The transport agreement with Switzerland, signed on a visit to Bern in 2018 by Iranian President Hassan Rouhani, envisages the complete liberalisation of the transport of goods and the removal of administrative barriers. A bilateral trade agreement has been in force since 2017.
“Collaboration in the transport sector is part of the road map Switzerland and Iran agreed upon in 2016,” a spokesman for the Federal Department of Foreign Affairs (FDFA) explains. The road map, he says, is the basis for deepening Swiss-Iranian relations.
Signed during President Rouhani's visit to Bern in July 2018, the road transportation agreement between #IranExternal link + #SwitzerlandExternal link has passed Majlies with a large majority. The agreement facilitates #bilateralExternal link goods + passenger transport, marking the expansion of ties + int’l trade. pic.twitter.com/d1xbp3123FExternal link
— Swiss Embassy Iran (@SwissEmbassyIr) October 19, 2020External link
The agreement is the latest example of Switzerland’s efforts to keep up its good economic and diplomatic relations with Iran despite Iran’s dubious nuclear policy and human rights situation.
“Since the nuclear deal was agreed upon in 2015, Switzerland has been trying to reactivate its economic and trade relations with Iran,” says Christian Blickenstorfer, former Swiss ambassador to Saudi Arabia, the United States and Germany, who was also political counsellor at the Swiss embassy in Iran in the 1980s. “After the nuclear deal and the gradual lifting of the sanctions, several European countries were hoping to expand their relations with Iran.”
A la carte sanctions
Even though Switzerland adhered to the sanctions the United Nations imposed on Iran in 2007, it only partially observed the sanctions put in place by the European Union (EU) a few years later. After the implementation of the nuclear deal in 2016 Switzerland even lifted some of its sanctions.
“It was clear that Switzerland had to adhere to the sanctions imposed by the UN, but not to the sanctions imposed by the US or the EU,” says Blickenstorfer. The problem with the US sanctions was that companies and banks that did not observe these sanctions were at risk of being prosecuted in the US. “Companies doing business in the US as well as banks are not prepared to take such risks.”
Humanitarian channel
Switzerland managed to find a partial solution to the problem. In February 2020, a payment mechanism for the delivery of humanitarian goods to Iran came into force. Under the “Swiss Humanitarian Trade Arrangement (SHTA)”, Swiss firms in the food, pharmaceutical and medical sectors have a secure payment channel with a Swiss bank for their exports to Iran.
“The payment channel for the delivery of humanitarian goods and pharmaceuticals to Iran could only be launched with the agreement of the US. It was conceive for purely humanitarian reasons to avoid a shortage of essential goods in Iran,” Blickenstorfer explains.
Long-standing ties
It is not by chance that Switzerland managed to broker this payment mechanism in cooperation with the relevant authorities in the US and in Iran. Switzerland has nurtured good diplomatic relations with Iran for 100 years, and through its protecting power mandate has represented US interests in Iran since 1980.
“This mandate to represent US interests with the revolutionary regime allows Switzerland to maintain normal relations with Iran,” says Blickenstorfer, adding that relations were not always easy. “In Iran, we are dealing with a government that is completely different from ours.”
UN arms embargo
When in October 2020, the 2007 UN arms embargo on Iran expired, Russia and China quickly expressed an interest in commencing arms trade with Iran.
According to Blickenstorfer, this would be out of the question for Switzerland. “The end of the UN arms embargo is unlikely to change anything for Switzerland. Iran is involved in several regional conflicts which makes supplying war material from Switzerland impossible.”
For the time being, the EU will also not get involved in arms trade with Iran as its embargo remains in force until 2023.
New US President
How China, Russia and other countries deal with the newly acquired freedom of trade will also depend on the new US president, as most countries regard relations with the US as more important than arms trade with Iran. During his election campaign, Joe Biden pledged he would reactivate the nuclear deal with Iran.
Blickenstorfer does not think that Switzerland’s protecting power mandate will change under the new US president. However, he wonders whether reactivating the nuclear agreement will be possible without renegotiating the deal, something Iran has so far rejected.
“If Biden were to seek dialogue with Iran just like Bill Clinton did, the well-functioning Swiss payment channel could be of use to him.”
2007: The UN Security Council imposes an arms embargo on suspicion that Iran was developing nuclear weapons
2015/16: An international nuclear deal promises an end to the arms embargo in exchange for Iran limiting its nuclear activities.
2018: The US withdraws from the nuclear deal calling it inadequate and imposing sanctions at the same time.
2020: The UN arms embargo expires.
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