Domestic Banks Unable to Support Oil Industry

Domestic Banks Unable to Support Oil Industry

Iranian banks do not possess enough financial resources to fund and support the country's oil and petrochemical industry; banks need to back industries rather than be involved in construction projects, said the international deputy to the Iran oil minister.

Masoud Hashemian, in a specialized panel for new methods of finance and fund raising in oil industry projects, on Tuesday  stated: "Experience shows that we have not succeeded as expected in absorption of finance from the private sector. One-sided contractor activities of the government may be the major cause of such issue", SHANA quoted him saying.
Although there are certain methods to supply domestic and foreign finances, they are not properly applied in the country. The fund supplying mechanisms in the banking system is not clearly defined as well, he added.
Hashemian asserted that collateral system for contractors is "in need of revision" as a contractor has to bail all of their assets in order to get a loan from a bank.
He considered the supply of funds from foreign banks as the art of the contractor.
In the same panel, Farzin Mahdyar, CEO of Omrab Engineering Company, said due to economic sanctions there are certain limitations on supplying domestic and foreign finance for oil industry projects and Iranian banks do not risk to involve in that area.
The solution to this problem is either the government finances the oil projects or the gates of global economy open to Iran so the market is available to the investors to fund, Mahdyar noted.
The consultant to Pasargad Energy Development Company (PEDC) also emphasized the difficulty of finance supply from domestic banks and said "Development of country's gas network can be highly accelerated if the banks are willing to finance the projects. The money will be returned to the banking system through people's payments."
Mohammad Hadi Rahbari further added the contractor is only responsible for facilitating the project's progress not to provide funds for it.
In another part of the panel, Mohammad Reza Tabibzadeh, member of the board in The Association of petroleum industry engineering and construction companies (APEC), stressed the same matter on the role of contractors and called for a "change in methods of granting loans" by the banks.
The panel was held as part of the 3rd National Congress of Contractors' System Development in Oil industry.

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