Iranian banks will be given the cold shoulder in the City after America’s imposition of new economic sanctions on Iran, a leading Anglo-Iranian business group predicted yesterday.

Lord Lamont of Lerwick, the former Conservative Chancellor and the chairman of the British-Iranian Chamber of Commerce, said: “I think the Iranian banks will find it very difficult to clear their US dollars in the City. This is quite a tricky issue.”

His comments came after Washington imposed harsh sanctions on the Iranian Defence Ministry and three state-run banks in a move that is expected effectively to paralyse the country’s banking system.

Lord Lamont also accused Henry Paulson, the US Treasury Secretary, of “jawboning” European banks. “What I think is a little unfortunate is threatening people who are acting within the law . . . European banks with branches in America shouldn’t have their business interfered with in Europe by America.”

It is understood that the UK Government has been privately briefing British business recently about the political implications of continuing to do business in Iran. This week’s statement from Mr Paulson has been widely interpreted as a warning that those businesses that persist in commercial dealings with Iran may also be frozen out of future business with the US.

Trade between Britain and Iran is relatively small, with UK exports to Iran totalling £362.5 million in the first ten months of last year, the latest period for which figures are available. Exports are down on 2005 by about 4 per cent, a fall that is attributed to the impact of US sanctions on Iran’s bilateral trade with other countries in the past 12 months.

Iran is Britain’s fifth-largest market in the Middle East and North Africa for direct exports. However, about 15 to 20 per cent of the UK’s exports to Dubai are then shipped to Iran. Taking these into account, Iran is Britain’s fourth-largest market in the area.

The number of leading British companies operating in the region has shrunk to a handful. However, one British business is defying international tensions over Iran and embarking on business with the country this weekend: tomorrow Bmi, the UK’s second-biggest scheduled airline, will become the only British carrier to fly to Tehran.

The airline is undeterred by the possibility of sanctions, or the timing of its inaugural flight, on a route previously flown by a British Airways franchise operator.

Bmi said that its daily flights were expected to be filled primarily with business flyers and their visiting friends and family: “We have considered all the risks, in the way that we would starting any new service.”

Michael Thomas, director-general of the Middle East Association, which arranges trade visits to the region, said: “For British firms in Iran, at the minute it’s like pushing water uphill. It’s very hard to find a bank that will take a letter of credit, and companies are having to do barter deals with Chinese firms to get paid.

“If you’re a big supplier in the US and you value that business you are not going to risk that business to supply Iran,” he added.

“Iran has got everything Turkey has, plus oil and gas, but it’s still way behind. At the end of the day, it’s a market with huge potential, and that’s a frustration for Iranian businessmen as well as British businessmen.”

Despite the difficulties of conducting business there, Mr Thomas believed that sanctions were preferable to conflict. “A war would backfire, but if there’s a drip, drip effect and if the standard of living goes down, it will implode,” he said.

Shell has come under intense pressure to scrap a £5 billion natural gas project in Iran after a call from a group of leading American pension funds for energy companies to cut their ties with the country.

Influential American institutional investors wrote to Shell and seven of its leading rivals, including Gazprom and Total, in the summer telling them that there was an increasing risk that sanctions imposed on Iran would affect their businesses. The funds are concerned that infrastructure developed by Shell could be targeted in any future war.

Peter Voser, Shell’s finance director, said yesterday that the oil major was still working on the technical specifications and economics of its potential projects in Iran. “We shall not take a final investment decision to move forward until all this prework has been satisfactorily completed. Once we get to that point, we shall take the economic, technical and also the political dimension into our decision,” Mr Voser said.

The US Securities and Exchange Commission recently put Shell on a list of companies that were working in “state sponsors of terrorism countries”. Shell said that its activities in Iran were transparent and information on them was fully available to investors.

British-American Tobacco, one of the British-Iranian Chamber of Commerce’s sponsors, said that it had faced no pressure from investors to withdraw from Iran.

HSBC, the biggest foreign bank operating in the Middle East, said it had a small representative office in Tehran that has no deposit or clearing facilities. “The office is a meeting place for our clients,” a spokesman said.

Iran by numbers

65.4m total population

$8,700 GDP per capita

15% unemployment rate

40% below poverty line 12% inflation rate

Source: CIA World Fact Book

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