The German Euler Hermes credit institution has agreed to establish a $5 billion credit line for Iran, Mohammad Khazai deputy minister of economy said Saturday. The credit is to be granted over 2-3 years.
Hermes had previously guaranteed some loans for Iran but the country was unable to meet its commitments due to the international sanctions and lack of access to SWIFT interbank messaging service.
"We have agreed to pay Hermes over $500 million over the course of one year as soon as the economic sanctions are eased," Khazai told Fars News Agency.
He referred to the ministry's efforts to absorb foreign investment in the post-sanctions era, saying that the Central Bank of Iran and the Ministry of Economy have held talks with several credit guarantee institutions over the matter.
"Russia's Finance Minister Anton Siluanov has promised to establish a $2 billion credit line for Iran in one of that country's well-known banks," Khazai said.
"We have held some preliminary talks with EKF, Denmark's official export credit agency, the Italian SACE group, the German Euler Hermes and the UK's Export Finance to prepare the grounds for persuading international banks and lending institutions to grant credit to and establish credit lines for Iran."
These institutions guarantee the international banks' resources, credit lines and finance projects in different countries or invest in them directly, according to the official.
He explained that the ministries or state-run companies which need financing for infrastructure projects in transportation, energy, agriculture, water resources management and the likes can present their schemes and technical details to the ministry and the banks. After the necessary assessment the funds will be allocated he foreign credits.
Khazai stressed the importance of attracting foreign investment and noted that "Iran's economy has got a good potential for investment" and is appealing to foreign investors. "Iran aims at absorbing investments that would help create and develop competitive markets and improve exports."
He stressed the necessity of developing infrastructure, importing machinery and equipment and specialized knowledge through foreign investment.
In absorbing foreign investment the priority is with FDI as it does not add to the country's foreign debts, according to the senior official. "However foreign investors are not willing to invest in some projects directly and that's when we have little option but to go for foreign financing instead of FDI."
Entering Int'l Markets
Another key priority for Iran's economic policymakers is to prepare the grounds for reconnecting to the world economy and entering international markets according to Khazai. "Iran's credit rating among the members of Organization for Economic Cooperation and Development is at the lowest. Therefore we should negotiate with international rating agencies to improve our credit rating."
Iran is talking with the UK over the Royal Dutch Shell's debts to Iran. "The British have agreed to repay $3 billion of the company's debts to Iran as soon as the sanctions are lifted."
He said Iran's total debt to international financial institutions is less than $3 billon and "this is proof that Iran has a good reputation and meets its commitments despite the economic sanctions.
