International banks and most insurers are likely to steer clear of dealing with Iran for some time, fearing they could face more fines from U.S. regulators despite this week's nuclear deal between world powers and Tehran.
With almost 80 million people and annual output of some $400 billion, Iran will be the biggest economy to rejoin the global trading and financial system since Russia emerged from the ruins of the Soviet Union over two decades ago.
But while Iran is trying to come in from the cold, many of the sanctions imposed over its nuclear programme are likely to stay for months and those that are lifted can be rapidly restored if the deal falters.
U.S. and European banking restrictions, for example, will be lifted only when the International Atomic Energy Agency has verified that Iran is keeping to its side of the bargain.
The layers of sanctions also include U.S. anti-money laundering legislation, and any breaches could lead to banks being cut off from the U.S. dollar clearing system.
"There's a real hesitancy for the right reasons," said Washington lawyer D.E. Wilson, former acting general counsel at the U.S. Treasury, whose Office of Foreign Assets Control (OFAC) enforces the legislation. "The banks don't want to get into trouble."
There are tentative signs of a financial thaw. In one of the first steps to normalise trade between Britain and Tehran, the UK's export credit agency told Reuters on Thursday it was planning to review Iran's creditworthiness.
But Germany's largest bank by assets, Deutsche Bank, said it would consider doing business in Iran only when sanctions disappear.
"Deutsche Bank will continue to adhere to all U.S. and EU sanctions against Iran," it said in a statement. "The bank closely monitors the implementation of the nuclear agreement and related sanctions and will reconsider its position if sanctions are lifted in areas of relevance to the bank."
Deutsche has yet to reach a settlement with U.S. officials over suspicions that it may have breached sanctions in dealings with Iran. The bank has already paid about 9 billion euros ($9.8 billion) in U.S. and European settlements and fines in the past three years, and faces more U.S. penalties in the Iran case.
Germany's second biggest lender Commerzbank declined to comment. In March, Commerzbank agreed to pay U.S. authorities $1.45 billion after it joined the ranks of European banks to acknowledge moving funds through the U.S. financial system for countries such as Iran and Sudan.
British banks will also be cautious given past experiences, industry sources said. They are generally pulling out of business likely to stir controversy and slimming their international operations in response to recent scandals.
HSBC was fined $1.9 billion in 2012 by U.S. regulators for violations including doing business with Iran, while Standard Chartered paid $667 million in 2012 for violating U.S. sanctions and a further $300 million after more compliance shortcomings were uncovered.
"Global banks are unlikely to rush in until the ground rules are clearly laid out by the U.S," an executive at a major bank based outside the United States.
U.S. banking groups JPMorgan Chase & Co and Citigroup declined to comment.
Lenders further afield are also playing safe. "Some banks that can operate lawfully beyond the reach of the OFAC sanctions have chosen as a matter of bank policy not to engage in any Iran dealings ... The juice isn't worth the squeeze," said Les Carnegie, who specialises in international trade and national security matters at law firm Latham & Watkins.
Global transaction services organisation SWIFT said on Tuesday current European Union sanctions remained in place which included "measures prohibiting companies such as SWIFT from providing specialised financial messaging services to EU-sanctioned Iranian banks".
Still, parts of Britain's financial services industry - which includes the Lloyd's of London insurance market - will be vying for business in Iran.
Government department UK Export Finance (UKEF), which provides banking and insurance guarantees to support British exporters, said on Thursday it would initiate "a review of Iran to assess creditworthiness, in light of the new agreement, and the expected positive effect on the Iranian economy".
However, it added that Iran had to clear arrears with UKEF "to a large degree" before full cover could be restored.
Nigel Kushner, a director with the British Iranian Chamber of Commerce association, said trade prospects would depend on Iran complying with a "multitude of obligations".
"The reality is that there will be no tangible change in the EU or U.S. sanctions regime for at least six to nine months at best," said Kushner, a London-based sanctions lawyer.
Industry sources said that while some insurers were gearing up for a resumption of business, they were unlikely to make any moves yet.
Helen Dalziel, senior market services executive at the International Underwriting Association, said the British Treasury had issued a notice to insurers saying its previous guidance remained in place. "They're not recommending trade with Iran at present," she said. "Essentially, nothing's changed for our members and won't change for several months, we believe."
Insurer Allianz said it would adjust its business "if and when the steps specified in the political agreement have been implemented".
A similar message was given by CityUK, a trade association working to promote UK financial services overseas. "Our focus will be on the need for a clear and consistent policy on sanctions and their operation," said Gary Campkin of CityUK.
Under interim accords reached between Iran and world powers, Iran was allowed to secure insurance cover to transport oil cargoes - Tehran's main revenue earner - for approved business.
The interim agreement was renewed on a six-month basis and most ship insurers - known as P&I clubs - remained wary of entering into contracts.
The International Group of P&I clubs, whose members provide liability cover to 95 percent of the world's tanker fleet, said it was difficult to say when EU and U.S. legislation would be
repealed or rolled back.
"In the meantime clubs should advise members with an interest in trading to Iran to proceed with extreme caution and continue to seek independent advice before committing to trade contracts," it said in a note this week.
($1 = 0.9170 euros)