Economy, Domestic Economy

Iran Settles German Debt as Turkish Ties Look Set to Grow

Iran Settles German Debt as Turkish Ties Look Set to GrowIran Settles German Debt as Turkish Ties Look Set to Grow

In the latest developments following the lifting of nuclear sanctions, Iran has settled its debt to German export credit agency Hermes and negotiated increasing trade with Turkey.

Germany announced this week that Hermes would soon reopen business for Iran following the country’s repayment of €500 million of debt.

According to Germany’s Federal Statistics Office, German exports to Iran went up 7% year-on-year in the first quarter of 2016, to €500 million. Compared to the overall 0.7% growth in the country’s global exports, this figure shows the importance of the Iranian market for German corporate, UK-based magazine Global Trade Review reported on its website.

Yet their appetite has been dampened by large European banks’ reluctance to finance Iranian trade and there is hope that Hermes’s renewed support will help move the dial.

Meanwhile, Turkey is hoping to triple its trade with Iran to no less than $30 billion “as soon as possible”, according to Turkish Customs and Trade Minister Bulent Tufenkci, speaking to Reuters last week.

“Iran represents very important opportunities for the Turkish economy, especially for sectors such as textile, food, automotive components, chemicals, metals and machinery. In the first four months of 2016, Turkish exports to Iran rose by around 49% from a year earlier,” said Seltem Iyigun, Turkey economist at British credit insurance provider Coface.

“The importance of the Iranian market rises especially in the current period when Turkish exporters and the tourism sector are suffering from geopolitical tensions in Iraq, Syria and Russia. In this sense, in the short term, the Iranian market can help exporters compensate the loss of market shares in these countries.”

Iyigun noted that a lot of SMEs and big Turkish companies are doing market research and making business visits to Iran to exploit opportunities this market offers.

She adds that most Turkish banks are not yet active in Iran, adopting the same wait-and-see attitude observed in the rest of Europe. However, it has been reported several times that Halkbank continued to process transactions with Iran, even under the nuclear sanctions.

Iran’s general director for foreign economic relations, Sadeq Akbari, even told reporters at the Turkey-Iran International Trade and Investment Arena on June 1 that Halkbank would be the bank processing the €6 billion of oil payments Indian firms owe their Iranian counterparts. He added that €600 million had already been transferred to the National Iranian Oil Company via the bank, under the instructions of the Central Bank of Iran.

Meanwhile, Royal Dutch Shell is reported to have resumed oil import from Iran, with Bloomberg referring to shipping data to confirm the booking of a tanker by the oil giant to carry 1 million barrels of Iranian crude to Europe on July 1.

Shell is, therefore, the second oil major to resume business with Iran, after Total signed an agreement to purchase up to 200,000 barrels of Iranian crude a day, during President Hassan Rouhani’s visit to France back in February.