Iran Receives First Round of Post-Sanctions Finance From European Banks

In what were the first finance deals clinched with cautious European banks after the implementation of the nuclear accord provided sanctions relief in January 2016, Iran signed two agreements worth a total of €1.5 billion ($1.8 billion) with Austria's Oberbank and Denmark's Danske Bank on Thursday.

A delegation headed by Mohammad Khazaei, director of the Organization for Investment, Economic and Technical Assistance, and Ahmad Araqchi, the newly-appointed Central Bank of Iran's deputy for foreign exchange affairs, which also included chief executives and board members of a cohort of Iranian banks, was in Vienna to sign the deals, the official website of CBI reported.

The two deals were signed hours away at the residence of Iran's Ambassador to Austria Ebadollah Molaei in Vienna.     

€1 Billion Austrian Deal

The first deal worth €1 billion ($1.2 billion), hailed as the first finance deal with European banks after the JCPOA, as the nuclear accord is formally known, was signed by 14 Iranian banks and the seventh-biggest bank of Austria that boasts a balance sheet of roughly €20 billion ($24 billion).

The 14 lenders are Karafarin Bank, Bank Saman, Bank Pasargad, Bank Refah Kargaran, Bank Mellat, Tejarat Bank, Bank Melli Iran, Bank of Industry and Mine, EN Bank, Bank Sepah, Export Development Bank of Iran, Middle East Bank, Bank Keshavarzi (Agro Bank) and Bank Parsian.

In early September, Oberbank's CEO Franz Gasselsberger had told Reuters that his bank is to sign a deal with Iran, which enables it to finance new ventures by Austrian companies in Iran lasting more than two years in areas that were previously under sanctions.

“We [already] have very concrete projects in the fields of infrastructure, rail, health, hospital construction, factory building, photovoltaics and hydropower,” he added.

According to the CEO, export credit guarantees covering 99% of a project’s volume will be provided by the Oesterreichische Kontrollbank (OeKB), the main Austrian body that issues them.

“Evidently, some Germans and Italians are also negotiating,” Gasselsberger also said.

€500 Million Danish Deal

The second deal worth €500 million ($600 million) was signed between 10 banks and the longstanding Nordic lender Danske Bank.

The Iranian banks were Bank Keshavarzi, Bank Mellat, Bank Pasargad, Bank Sepah, Bank Parsian, Bank Saman, Tejarat Bank, Bank Melli Iran, Bank of Industry and Mine, and EN Bank.

In early January, a Danske Bank spokesman had confirmed to Reuters that the bank was in talks with CBI on arranging credit to clients with business activities in the country.

Danske Bank, founded in 1871 and headquartered in Copenhagen, is the largest bank in Denmark and a major retail bank in the northern European region with over five million retail customers. It was ranked 454th on the Fortune Global 500 list for 2011.

Further Negotiations

As part of the trip to Vienna, Khazaei, Araqchi and Molaei also met with a number of Austrian and Danish officials to discuss the expansion of financial and banking ties.

They convened with Austria's Federal Minister of Economy Reinhold Mitterlehner, President of Oesterreichische Nationalbank (OeNB) Ewald Nowotny and the president of OeKB and discussed ways of expanding financial, banking and investment relations between the two nations, according to Shada, the official news outlet of the Ministry of Economic Affairs and Finance.

While the Austrian economy minister referred to the Oberbank deal as a positive factor that can work in line with expanding technical, economic and banking ties, the head of the Central European nation's central bank talked about the possibility of Iranian banks opening accounts with their Austrian counterparts and expanding relations with CBI.

On the Danish side, the delegation heads reportedly met with the chief executive of Eksport Kredit Fonden, Anette Eberhard, who said the country's Exim bank is ready to boost bilateral ties.

In the meeting, at the end of which an agreement was signed between the Organization for Investment and EKF, Khazaei also said both Iranian public and private sectors are ready to work with their Danish counterparts in water resources management, renewable energies and environmental technologies.

As has been stressed both by CBI and the Organization for Investment affiliated with the Ministry of Economy, the government is the sole guarantor of any and all foreign finance deals while the private sector faces no limitations whatsoever in employing the funds after providing the documents and obtaining the related permits.