In the course of many visits to Iran over the years I have come torealise that no country is the subject of such fascination and mistrust in Iranas the United Kingdom. So my friends at Tehran Times are interested to hearmy thoughts in relation to Anglo-Iranian relations following the recent UKelection.

This election was fought and won by Johnsons Conservative party inorder to Get Brexit Done so that the UK will now definitively after threeyears of political paralysis leave the European Union. I believe this resultto be positive for Iran for two reasons, the first being Prime Minister Johnsonas a person, and the second being the new role and responsibilities ofJohnsons office as UK Prime Minister in international diplomacy and commercefor an independent UK.

Johnson as a Person

Those are my principles, and if you dont like them.well, I haveothers.. Groucho Marx.

As with President Trump it is a mistake to view Prime Minister Johnsonthrough the lens of rational statecraft. Johnson combines intelligence,idleness and pure expedience in equal measure. He owes his success to hiscapacity to delegate strategy and responsibility to capable and diligentsubordinates such as Dominic Cummings, the Grand Vizier to Johnsons ByzantineCaliph.

Perhaps the most important point for Irans decision-makers to bear inmind with PM Johnson is that, like his father Stanley before him, he genuinelylikes and respects Iran and Iranians, and the countrys great culture, historyand heritage. So, all things being equal, the accession to power of Johnson asa person is positive for Iran.

Johnson as UK Prime Minister

Unfortunately, all things are very far from equal for Iran in terms ofaccess to the global economy, and the question is to what extent Irans accessmay improve after UKs imminent Brexit departure from the European Union underJohnsons leadership.

While much is made of the UKs special relationship with the US, thishas been poisoned by a unilateralist Trump administration which is thoroughlydespised by the UK ruling class from which PM Johnson springs. Despite agreat deal of pro-American and anti-European rhetoric from within Johnsonsparty, the reality is that, not least for geographic reasons, two thirds of UKtrade is with EU members and this is unlikely to change soon.

PM Johnson is pragmatic enough, and has a big enough parliamentarymajority for the next five years, to allow his more anti-European & pro-USelements to say what they like while he does what he likes. So what practicalsteps could be taken to improve UK/Iranian relationship?

Trade Clearing

That PM Johnson is willing to engage with Iran was clear from his visitto Tehran two years ago in December 2017. Unfortunately for him, hispredecessor PM Theresa May, under instructions from the US, killed the releaseto Iran via the banking system of long outstanding funds which could open theway to further trust-building measures.

New financial technology (Fintech) presents new options for innovativeUK trade clearing which enable bank payment channels to be transcended. In theenergy field, the UK may go beyond the political EU Energy Union project whichaimed to both create a pan-European market in energy as a commodity and supportthe Euro as a currency by securing denominated debt on energy.

The fundamental flaw of the INSTEX mechanism is that it is reliant onbanks as payment channels, and no major bank wishing to clear dollars isprepared to participate in INSTEX even for trade permitted under US sanctions.The UK may now transcend the INSTEX Euro trade clearing mechanism by creating acomplementary trade clearing system in London.

So a new UK/Iran trade clearing system may directly connect businesseswishing to supply for use in Iran permissible technologies such as desalinationand renewable energy in particular.

How may this be achieved?

Petro Fintech

Financial Technology is the combination of law & accounting withinformation and communications technology (ICT). A new generation of onlinebusinesses emerged around 2001 from the Internet Bubble of complex and crazyventures. A similar new wave of Fintech is now emerging from the initial waveof Blockchain secure shared databases and Coin financial instruments withcomplex and vulnerable connections to the conventional financial system.

In the field of energy fintech Venezuelas Petro instrument is anexcellent case study. The first problem with this Petro is that it istechnically backed, not by (say) gasoline or diesel fuel which the averageVenezuelan can use, but by heavy grades of crude oil useful only to a fewcomplex refineries. Secondly, this technical oil backing is useless even tocomplex refineries because Venezuela will not accept the Petro from theminstead of dollars or even Euros in payment for oil.

In October 2008, the global banking system froze and the oil pricecollapsed, which OPEC mistook for lack of demand, but was simply due to theinability of oil buyers to clear payments using bank channels. Meanwhile, inTehran I proposed, at a major conference chaired by H E Nematzadeh, a simpleprepay instrument (Petro) returnable in payment for fuel supply.

As an energy prepay (credit) instrument Irans reality-based Petrowill be issued by fuel producers or refiners, not by Irans banks orgovernment. The NewClear combination of transparent issuance, professionalsystem management and mutual assurance by a Protection and Indemnity (P&I)club agreement will enable a Petro Clearing Union.

Proofs of Concept

Every network is founded by its first connection. There is no reason whyIrans frozen assets in the UK, whether long outstanding debts, or ongoing gasproduction, cannot be mobilised using simple effective energy credit clearing.In this way, projects may be mobilised in Iran exempt from US sanctions and withsuppliers and contractors willing and able to implement them, but unable toaccess conventional payment via banking channels.

Moreover, in Iran itself, all of the elements now exist to rapidlyintroduce the Petro domestically in order to reduce the initial frictions fromreducing subsidies.

My colleagues and I stand ready, as we have since 2004, to at lastcommence the implementation of a new generation of financial technology bothdomestically and in bilateral UK/Iran trade clearing: in this way Iran may advancefrom nuclear to NewClear agreements.

From ourpartner TehranTimes

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