Economy, Business And Markets

Seoul to Extend $5b Credit for Iran Trade

Seoul to Extend $5b Credit for Iran Trade Seoul to Extend $5b Credit for Iran Trade

Export Guarantee Fund of Iran (EGFI), and its South Korean counterpart, Korea Trade Insurance Corporation (K-sure), took practical steps on Monday to promote two-way trade by signing an MOU at the EGFI head office in Tehran. As part of the agreement, a $5 billion credit line will be extended by the Korean government to Iran.

Identifying opportunities for trade of goods and services, co-financing, re-insuring and co-insuring projects or contracts in third countries involving Korean and Iranian exports, are the fields in which both sides expressed a desire to cooperate, according to an EGFI press release.

“Iran’s external debt was $30 billion before the sanctions and the outstanding amount now is almost $4 billion, which Iran is ready to pay but cannot do so due to the banking restrictions,” said EGFI chairman Kamal Seyed Ali, during a meeting with his Korean counterpart.

 Seyed Ali also expressed EGFI’s readiness to cover a part of the risk K-sure underwrites on Korean exports to Iran.

Most international sanctions against Iran’s economy were lifted in January after Tehran implemented a deal with six world powers to restrict its nuclear program. But Washington has not eased the sanctions that were originally imposed over the dispute over missile development programs, human rights issues and alleged support of terrorism.

The fear of being caught up in the remaining sanctions has deterred most foreign banks from restoring links with Iran, prompting Tehran to engage in active diplomacy to remove the remaining obstacles.  

 Renewed Optimism  

Kim Young – hak , the chairman and president of Korea Trade Insurance Corporation, who accompanied the South Korean president in her official visit to Tehran heading a high ranking commercial and political delegation, said that K-sure’s exposure on Iran in 2011 was around $1.6 billion but it dropped to $ 800 million00 in 2014 due to the sanctions.

“But K-sure is keen on increasing its exposure in Iran to more than $2 billion as many Korean traders are eager to restart their trade with Iran,” he said, adding  that under K-sure’s insurance coverage, a credit line of more than $5 billion is supposed to be extended by the Seoul government to Iran for specific projects.

Iran’s Ministry of Economic Affairs and Finance, South Korea’s Ministry of Trade, Industry and Energy and K-sure on Monday signed an agreement involving a $5 billion credit line for Korean exports to Iran.

Arash Shahraeini, a board member at EGFI said the agency’s new strategy is not only to support Iranian exporters, but also to play a role in attracting foreign direct investment. “To this end, we are willing to cover the local share of export-oriented projects in Iran, implemented through a consortium of foreign financiers and export credit agencies including K-sure.

Shahraeini told the Financial Tribune that Koreans are mainly interested in  investing in the oil, gas, petrochemical projects and probably the auto industry.

“EGFI is ready to cover part of the investment risk if the projects are aimed at producing exportable goods,” he said.  

 “However, establishment of correspondent banking relations is a prerequisite for extending K-SURE’s $5 billion credit line,” he said hoping that the issue will be addressed soon.

President Park Geun-hye arrived in Tehran on Sunday on a historic trip aimed at boosting political and economic relations between the two countries.

Park met her Iranian counterpart, Hassan Rouhani, on Monday in the first meeting between the leaders of the two countries since the establishment of bilateral diplomatic relations in 1962.