Business, Finance & Economics

When the banks don't work, a suitcase full of cash will suffice

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Credit: REUTERS/Raheb Homavandi
A customer buys Iranian gold coins at a currency exchange office in Tehran's business district October 24, 2011.

It could be a great start to a movie: a shady character with a suitcase full of cash tries to get through airport security without attracting much attention.

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Except it's not fiction for many Iranians, or for those doing business in Iran these days. The current US sanctions on Iran make suitcases full of cash one of the most efficient ways to get money into and out of Iran.

Richard Oladi is one of a handful of British businessmen working in Iran. He says he works for the Tehran Stock Exchange and has been in Iran since 2010. His company, which he didn't name for security reasons, is based in London and employs people inside Iran.

Oladi says one of the biggest challenges the company has faced over the years is dealing with sanctions on the SWIFT banking system, the inter-bank payment system.

"If you wanted to transfer money from, say, Bank of America, into an Iranian bank account, previously you could do that through SWIFT," he explains.

But as the sanctions on Iran were tightened, that system was blocked. Businesses and Iranians alike turned to what are called "Sarafi" — or exchange counters.

“[Those exchange counters] were using a system called a 'Havaleh,' where you pay a percentage and money gets sent through bank accounts in Dubai and Turkey," he says. "It takes a little bit longer. Rather than having an instant transaction, it was taking two weeks.”

Then, American and European officials went after those banks, putting enormous pressure on them to stop servicing Iran. And they succeeded.

"Even these back channels were closed to us," Oladi says

That made simple tasks, like paying employees, a challenge.

"The money that we pay our staff in Iran comes from the UK," Oladi says. "Rather than being able to transfer it directly, we had to almost bring the money via a courier, via DHL, or somebody would have to go to London and bring money for three months to pay the staff."

And his company isn't the only one relying on a very old-fashioned means of money transfer.

"It happens every day. You’ve got a lot of  people, a lot of Iranians particularly, that have got investments in Iran, that own property, that get rent in Iran and want to take the money back, say for instance, to London," he says. "They would just carry this money back either as gold or hard currency."

The point of the US and European sanctions against Iran was to make doing business with Iran extremely difficult, so that Iran would be willing to compromise on its nuclear program.

As part of the temporary agreement between Iran and Western powers some sanctions are being lifted, but the banking restrictions remain in place. So Oladi's company will still have go through the usual suitcase route to bring money into the country.

But he says just the talk of lifting sanctions is changing things in Iran.

“Things are much more stable. The economy feels a lot more stable. The black market in currency has almost been obliterated. The price of goods is coming down because the dollar has come down," he says.

Oladi also says the positive momentum could lead to more investments in Iran.

"Iran is now on the verge of opening up. Iran is a consumer-hungry country. You’ve got an enormously young population, you’ve got an enormously wealthy population and cash-rich economy, especially in Tehran. You’re not seeing companies pouring in yet, but you’re certainly seeing a lot of companies looking at coming into Iran very soon,” he says.

It's likely, though, that they'll hold off until the west lifts the sanctions that require people like Oladi to carry in bags full of cash.

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