Europeans Stymieing Investment

A deputy Iranian minister said European governments are not fully committed to the implementation of a nuclear deal with Iran, blaming them for stymieing investment into the Islamic Republic.

Asghar Fakhrieh Kashan, deputy minister of roads and urban development, added that European financing agencies were failing to support businesses keen to invest in the oil-rich country, Financial Times reported.

Export credit agencies were demanding premiums on insurance that made banks insist on putting “unacceptable” terms in contracts related to political risk, he said.

“Iran will not accept any clauses in trade agreements, which insert political risks alongside commercial risks,” said Kashan, who is involved in Iran’s negotiations over multibillion-dollar deals with Boeing and Airbus.

“This is where European countries are failing to be committed to the nuclear agreement. One of the main reasons the signing of contracts in various sectors has been delayed is this issue.”

State-affiliated export credit agencies play a vital role in supporting businesses looking to invest overseas by providing loans and insurance.

Under the terms of last year’s deal, Tehran agreed to scale back its nuclear activities and western powers lifted many sanctions.

President Hassan Rouhani’s government hoped the deal would open the door to foreign investment to help revive the stalling economy and tackle widespread unemployment.

But while western and Asian business delegations have flocked to Iran since the deal was sealed and signed thousands of provisional agreements, few big contracts have been finalized. That is partly because the US retains some sanctions under the pretext of Iran’s alleged financing of terrorism, which has made European banks wary of doing business in Iran.

Kashan said European governments “cannot stand aside and watch” Iran implement the agreement “unilaterally”.

“Why should Iran accept very exceptional terms and conditions in its contracts with European companies? This is not called a normal relationship,” he said.

Referring to the impact of western sanctions on the economy, the deputy minister stressed that if anyone needed guarantees against political risks, it was Iran.

“Our experience is that Peugeot suddenly leaves Iran’s market [because of sanctions] despite commitments of giving after-sale services and Iran’s banking accounts are unlawfully closed down overnight making Iranian companies unable to pay back their loans,” Kashan said.

“Iranian students were prohibited to study in certain fields, something with clear contradiction with human rights.”

The government in Tehran is under pressure at home to deliver on the economic dividends of the accord ahead of elections next year when Rouhani will be seeking a second term. The president faces stiff resistance from conservatives who contend the nuclear deal has brought little benefit.

The US gave clearance last month for Boeing to sell 80 aircraft and Airbus 17 to Iran Air in a boost to supporters of the nuclear deal.

Kashan said export credit agencies had no role in the multibillion-dollar lease-and-purchase deals, but political risk had also been an issue in those negotiations.

“We have a problem with an ‘illegality’ clause that foresees such possibilities like snapback sanctions and new sanctions which are not acceptable to us,” he said, adding that these problems were being resolved.

Kashan expected the contracts to be signed in November, with the first deliveries from Airbus in early 2017 and Boeing later in the year.

While western businessmen acknowledge banking restrictions remain a major obstacle, they also want greater reforms to bring more transparency to Iran's financial and economic systems.

Italian financing agencies agreed in April to give Iran nearly €5 billion in credit lines and guarantees for exports.

John Kerry, the US secretary of state, has also urged western banks to reengage and help finance companies seeking to win contracts in Iran.