Economy, Business And Markets

Hermes Reopens Export Guarantees for Iran

Hermes Reopens Export Guarantees for Iran
Hermes Reopens Export Guarantees for Iran

Iran's ambassador to Berlin says the Hermes cover debt has been repaid and as a result, Euler Hermes coverage will resume soon.

Noting that coverage from the German insurance company will be revived as of Tuesday and pave the way for cooperation between Iranian and German banks and companies, Ali Majedi said: "Iran has repaid all its debts – about €500 million [$567 million] – to Hermes."

Hermes cover is a common way of referring to an export credit guarantee (ECG) by the German government. The 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.

"Negotiations with Euler Hermes began with the help of the Central Bank of Iran nine months ago. The negotiations ended on Friday in Berlin with a representative of the CBI present, the issue of the Hermes cover debt was resolved in full and they will be ready to start insurance coverage of Iranian businesses from June 21", Majedi was quoted as saying by Tasnim News.

At the beginning of May, Mohammad Khazaei a deputy minister of economy had announced that Iran and Germany had reached an agreement over the Hermes cover debt. He had said that in light of the recent agreements, Germany’s export cover for Iran was expected to reach €7 billion ($8.09 billion). In mid-February, the German government had demanded that Iran first clear its debt before it resumes providing guarantees for German exports to the Islamic Republic.

Naming some of the positive effects of this recent development, Majedi stressed that with Hermes entering the fold and covering projects and imported goods to Iran, "the big banks will be encouraged to resume dealing with Tehran and issue loans as normal."  He went on to say that "we should manage to reduce Iran's investment risk level from 7 to 5."

"With the help of related ministries in Iran, we expect to be able to use the Hermes cover by the end of 2016 and put at least two or three projects under its umbrella", the envoy added.