Iran’s Biggest Cargo Shipper Eyes London IPO

Iran’s top cargo shipping company has held meetings in London to discuss a possible listing on London Stock Exchange, but has so far been thwarted by US sanctions that still scare banks off Iranian business, reads an exclusive Reuters report, citing four Iranian and two western sources.

Islamic Republic of Iran Shipping Lines was removed from international sanctions blacklists last year and, after years of isolation, aims to raise funds to modernize its fleet. It has already placed an order for new ships estimated to be worth $626 million.

A flotation on LSE would make it the first Iranian company to list on Britain’s main exchange since the Islamic Revolution in 1979.

But the difficulty in achieving such a landmark shows how far Tehran still remains from its goal of integrating fully with the global economic mainstream, since its 2015 deal with world powers to lift international sanctions in return for curbs on its nuclear program.

President Hassan Rouhani, who faces a campaign for reelection in May, has struggled so far to demonstrate to voters real economic benefits from the deal. He won office in a landslide in 2013 on a promise to reduce Iran’s isolation and the nuclear deal is his crowning achievement.

Most international sanctions on Iran were lifted last year as a result of the nuclear deal. But the United States still has separate sanctions in place over Iran’s missile program and the administration of new President Donald Trump has signaled it would take a tough line.

The four Iranian officials and two western financial sources told Reuters the Iranian company had expressed interest in an LSE listing. Two of the Iranian sources, both senior officials in Tehran, said meetings had already been held with LSE in London about a possible float for IRISL.

In an email to Reuters, a source at IRISL denied any measures had been taken for a possible listing on London Stock Exchange. The LSE declined to comment.

All six western and Iranian sources spoke on condition of anonymity to discuss an initiative that has not officially been made public.

  US Sanctions

Experts on sanctions say any Iranian IPO in London would run up against the impact of the remaining US measures, which have deterred British-based banks from clearing payments or facilitating transactions for Iranian companies.

Even the UK subsidiaries of Iranian banks with British licenses have yet to offer payment clearing services in sterling.

“In the current climate, I believe it is wholly unrealistic for IRISL to expect to pull off a listing in London,” said Nigel Kushner, a leading London-based sanctions lawyer.

“In circumstances where no UK clearing bank is willing to become involved and when Iranian banks that may legitimately trade in London are still not able to clear their transactions in London, how on earth is a listing going to happen?”

The sources did not say how much capital IRISL was seeking to raise in a potential initial public offering.

During the height of sanctions, the United States and European Union blacklisted the shipping firm, accusing it of involvement in nuclear proliferation efforts, which it denied. A European Union court ruled in 2015 that the EU had not given valid reasons for the allegations against IRISL.

IRISL’s ambitions to become a big global cargo carrier are constrained by the age of its fleet. It operates 26 ships, worth just $166 million, according to ship valuation company VesselsValue. IRISL placed an order in December for 10 ships with South Korean shipbuilder Hyundai Heavy Industries Co Ltd. Those ships would be worth $626 million, according to VesselsValue.

If it is still too difficult to hold an IPO in London, Iranian companies, including from the telecommunications sector, could turn instead to Italy’s stock exchange for a potential listing, Iranian sources said.

The Italian stock exchange, Milan’s Borsa Italiana, is part of LSE Group. Borsa Italiana declined to comment.

For Iran, pressures to show more progress are mounting ahead of the country’s presidential election in May. Hardline opponents say Rouhani has failed to get the economic windfall from his nuclear deal and some voters are losing patience.

“Despite Rouhani’s and his government’s efforts, almost all banking transactions are blocked,” said one senior Iranian banking official.

“This will impact the upcoming election and as you see hardliners have been using it against Rouhani in the past few weeks. Without foreign investment and the financial backing of major international banks, Iran’s economy cannot recover.”

Earlier, IRISL Chairman Mohammad Saeednejad said that the container shipper expects to have recouped by the middle of next year the business lost while Iran was subject to nuclear sanctions.

“Step by step, the problems have been resolved, removing many restrictions and limitations,” since the sanctions were lifted, he told Reuters in an interview at a shipping conference in Copenhagen, Denmark, in October.

“I think at the maximum in mid-2017, the whole thing would be in the normal manner (of) things,” he added.

With almost 90% of Iran’s foreign trade taking place through its territorial waters, Iran’s ports (of which there are 11 primary ones) are especially important. IRISL is the primary domestic player in this area.

Following the adoption of JCPOA, IRISL has announced its intention to become one of the world’s top 10 shipping lines by 2020.

Alphaliner has listed the Islamic Republic of Iran Shipping Lines as the 20th operator among the top 100 container lines, with a total capacity of 99,867 TEUs over 47 ships.