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Banking Woes Afflict Iran’s Steel Sector

Keyvan Jafari Tehrani, the head of international affairs  at Iranian Iron Ore Producers and Exporters AssociationKeyvan Jafari Tehrani, the head of international affairs  at Iranian Iron Ore Producers and Exporters Association

A number of European banks are ready to cooperate with Iran following the relaxation of sanctions and the country’s gradual integration into the international community.

However, the steel sector’s representatives see no obvious improvements in the mechanisms of export-import operations. So far, only small banks are interested in cooperating with Iranian companies, according to Metal Expert, a Ukraine-based provider of news and analysis on steel products and steelmaking raw materials industries.

At present, a number of financial institutions from Italy, Austria, Switzerland, Germany and Belgium are going to strengthen ties with Iran’s banking industry. Although official sources have not published the names of the banks to increase cooperation with Iran, market participants say the institutions are Austria’s Raiffeisen Bank and Erste Bank, Italy’s Mediobanca and Banco Popolare, Germany’s EIH, KfW and AKA, Belgium’s KBC, the Netherland’s ING and Turkey’s Halk.

“These banks have established certain partnerships with Iran’s banking sector, but they issue letters of credit with a small value–$10-50 million,” a financial expert said.

At the same time, bigger banks have shown little interest in serving Iranian clients so far because they fear sanctions from the US.

In turn, steel market participants stress that banking sector issues are still urgent.

“Now we can see that sanctions have not been cancelled altogether. It is still difficult to open a letter of credit. Foreign financial institutions cooperate with Iranian banks only on the euro basis, while the market for steel products and iron ore largely requires dollar payments,” a member of the board and the head of international affairs at Iranian Iron Ore Producers and Exporters Association, Keyvan Jafari Tehrani, said.

Large Iranian steelmakers expressed a similar opinion during the Third Iran Steel Export Perspectives Conference held in Dubai, the UAE, in early September.

Financialtribune.com