Economy, Business And Markets

Germany, Iran Agree on Hermes Debt

Germany, Iran Agree on Hermes DebtGermany, Iran Agree on Hermes Debt

Iran and Germany have reached an agreement over Iran’s €500 million ($578.9 million) Hermes cover debt, said Iran's deputy minister of economy, Mohammad Khazai on Tuesday, during a meeting of the Iran-Germany Joint Commercial Commission in Tehran.

Khazai added that Germany’s export cover for Iran is expected to reach €7 billion ($8.09 billion), considering recent agreements, Ministry of Economic Affairs and Finance News Centre, SHADA, reported. The official did not elaborate on terms of the agreement.

Iran was asked to clear its debts before it resumes providing guarantees for German exports.

German deputy economy minister, Uwe Beckmeyer, also said on Tuesday that his ministry has asked German banks to start relations with Iran, to get the best of new opportunities.

Beckmeyer said on Tuesday Iran had promised to repay soon old debts arising from state guarantees for German exports, clearing the way for fresh guarantees to be issued.

"Iran has now recognized its old debts and promised me to pay them in the near-term," Beckmeyer told Reuters.

Array of Options

Hermes cover is a common way of referring to an export credit guarantee (ECG) by the German government. These guarantees are an important part of German foreign trade policy and protect German companies in the event of non-payment by foreign debtors. The export credit guarantees of the Federal Republic of Germany offer an array of insurance options which are mainly targeted at exports to developing countries and emerging markets.

The head of the German banking association, Michael Kemmer, said on Friday that restoring German banks’ financial ties with Iran will take time given debt owed to Berlin and transparency concerns.

German industry has been hoping for a surge in exports to Iran after international sanctions were lifted in January in return for the Islamic Republic complying with a deal to curb its nuclear ambitions.

Iranian banks and companies faced difficulties for transferring money during the sanctions’ era and foreign credit insurance agencies had to cover Iranian banks’ and companies’ due payments and now the government  has to settle all the outstanding debts to foreign firms.

Debts to foreign insurers like Sace and Coface and Hermes had stopped them from opening new credit lines for Iran. The CBI is in talks to settle the pending issues -- an exercise that is complex and time consuming.