EGFI Rebuilding Bridges
Economy, Business And Markets

EGFI Rebuilding Bridges

Even though sanctions against Iran were officially lifted on January 16 and Iranian banks got reconnected to SWIFT interbank messaging system, some European banks are exercising caution about normalizing relations with the Islamic Republic.  
However, some have gotten over the fear to do business with Tehran, namely Italy's Mediobanca and Unicredit as well as smaller banks like Banco Popolare, according to Arash Shahraini, deputy chief of the Export Guarantee Fund of Iran.
“Following the implementation of Iran's nuclear deal with the six global powers last month, non-US banks are allowed to directly work with Iranian entities. However, major European banks are still wary mainly due to the fines they had to pay to the US Treasury Department’s Office of Foreign Assets Control,” he told Financial Tribune on Saturday.
“Transactions in any currency except the US dollar are now allowed, including the euro.”
European companies and banks have shown interest in expanding relations with Iran, Shahraini said, referring to the Global Trade Review (GTR) Mena Trade Finance Week 2016 in Dubai last week, where he and Mojtaba Khosrowtaj, deputy minister of industries, mining and trade, were among the speakers along with representatives from 30 countries.
 “I made contact with our commercial banks on Feb. 14 and they said they have been successful in opening letters of credit and transferring money to any destination," Khosrowtaj told the audience. "But this doesn’t mean that they have correspondent banks in all countries. In some countries they have partners who make the transactions on their behalf, but they are trying to do the same with the big banks in Europe.”
However, it appears that banks on an increasingly significant scale are reopening their Iranian business in a very careful and compliant manner, but few want to publicize it.

Attracting Investments
Shahraini said as envisioned in the next five-year economic development plan (2016-21), Iran needs $1,000 billion for its development projects during the five years. “Foreign investment should account for a quarter of this amount, i.e. $50 billion annually.”
“At first glance, the amount might seem too much to repay, especially because the country intends to settle its debts on a yearly basis,” he said. “But considering Iran’s growing GDP, as forecast by international institutions plus the surge in Iran’s exports both oil and non-oil products, the number should make sense.”
Iran has always met its financial commitments, Shahraini said. “We can once again be one of the world’s top financial markets as we were before 2006.”
According to Khosrowtaj Iran needs foreign investment to develop major projects including in the oil and energy sectors ($200 billion), transportation, especially railroads, information technology and  tourism.
“We have made it clear that any investment should be based on producing value added products and lift the manufacturing sector, especially exportable goods that will curb the economy's dependence on oil,” Khosrowtaj said.
Investments should also be of the type that creates jobs to help tackle the country’s 10.7% unemployment, the deputy minister said.


Expanding Credit Ties
The EGFI is expanding ties with various export credit agencies (ECAs) and has held talks with a couple of institutions across the world, including the United Kingdom Export Finance (UKEF), Japanese Nippon Export (NEXI)and Investment Insurance Export Credit Guarantee Corporation of India(ICGC), and ECAs from Russia, South Africa, Turkey and OKEB.
“Ali Sherwani, UKEF’s regional head for Mena and Central Asia, will visit Tehran soon to finalize a cooperation deal with EGFI,” Shahraini said. An agreement with NEXI will be signed during Japanese Prime Minister Shinzo Abe's upcoming visit to Iran.
He added the EGFI chief executive will sign a deal with India's ICGC on Sunday during a visit to that country.

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