Across town from White House, Iran confirms big financing deals with European, Asian nations

Across town from White House, Iran confirms big financing deals with European, Asian nations
The World Bank headquarters building in Washington, DC.
By bne IntelliNews October 15, 2017

In a direct response to US President Donald Trump’s attacks on the Iran nuclear deal, senior Iranian officials were in Washington, DC on October 14 to meet with global banking and finance officials at the World Bank (WB) and International Monetary Fund (IMF) gatherings.

Iran, flustered but not deterred following Trump’s decertification–but not withdrawal–from the nuclear accord announced at the White House on October 13, went ahead with talks arranged with several senior central bank representatives and government officials from dozens of countries. The aim was to shore up support for the November 2015 deal–formally known as the Joint Comprehensive Plan of Action (JCPOA) and signed by Iran, the US and five other major powers–and to continue with the push for the reintegration of Iranian banks into the global financial system. Progress on the latter point has proved difficult since the JCPOA came into effect because of unilateral American sanctions that bar Iranian involvement in dollar transaction.

Mohammad Khazaei, a senior Iranian government official and former ambassador to the UN, was quoted as saying by Mehr News Agency that the Iranian delegation set out to build on several credit guarantee fund commitments signed off by countries including France, Denmark, South Korea and Italy of late.

Khazaei, currently head of Iran's Organisation for Investment, Economic and Technical Assistance (OIEA), the main investment organisation of the Islamic Republic, reportedly added that “we have moved ahead with several foreign financing deals while here”.

He was even quoted as saying that “some of our negotiations with foreign delegations have led to the sealing of final contracts, investments and financial agreements.”

$8bn from South Korea, $10bn from China
In one specific deal inked in the US capital, a South Korean line of credit worth $8bn was finalised on the sidelines of the global banking and finance meetings. Not to be outdone, Beijing has according to some reports moved ahead with its own loan to the tune of $10bn. The financing is destined for several infrastructure projects around Iran, most notably investments related to Beijing's One Belt, One Road (OBOR) trade infrastructure initiative which envisages Iran as a key transport hub on the Eurasian transport network.

Without providing numbers, Khazaei also said that Iranian officials were pushing ahead with Russian investment in continuing the construction of a new thermal power plant in the southern port of Bushehr in Hormozgan province. That deal, initially signed earlier this year, could see Russia’s state-owned Vnesheconombank (VEB) offer a loan of €1.2bn as part of €2.2bn of finance approved by the Kremlin, as previously reported by bne IntelliNews. It is expected to be paid over in parts across five years, and is to see the building of a 1,400 megawatt thermal power plant by 2020, if all goes to plan.

In all some $14bn in direct finance has been offered to Iran in recent months with much of that being guaranteed by foreign governments in ways that get around US banking hurdles.

French state investment bank Banque publique d'investissement (BPI France) is to from 2018 provide €500mn in finance to French companies investing in the Iranian economy, while Austria’s Oberbank signed a major finance deal with over a dozen Iranian banks based on which it is to provide €1bn in credits to Austrian companies investing in the Iranian economy.

Oberbank's financing is to utilise local commercial banks who are to use the money to lend to civil and infrastructure projects. As the eighth biggest bank in Austria, Oberbank will set out to work with low-risk projects in Iran through 14 Iranian lenders in all. They are Parsian Bank, Bank Keshavarzi (Agriculture Bank), Eghtesad Novin Bank, Export Development Bank of Iran, Middle East Bank, Sepah Bank, Bank of Industry and Mine, Bank Melli Iran, Tejarat Bank, Bank Mellat, Bank Refah, Saman Bank and Karafarin Bank.

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