Private Sector to Get Share of Italian Finance

EghtesadOnline: A board member of Middle East Bank, which alongside Bank of Industry and Mine was one of the two Iranian banks that clinched a €5 billion finance deal with Italy's Invitalia on Thursday, elaborated on the landmark deal.

News ID: ۷۴۴۶۴۵

14 January 2018

"The Middle East Bank will only use the credit line of the deal to fund the private sector, and the Bank of Industry and Mine will handle the allocation of credit lines to government and public sector entities," Seyyed Hossein Salimi also told IBENA.

According to the banker, who is also the deputy head of the Money and Capital Market Commission at the Tehran Chamber of Commerce, Industries, Mines and Agriculture, eligible private sector projects in terms of profitability and forex generation, which can also repay their loans, will be able to receive credits from the finance deal.

"In addition to the profitability issue, people seeking this credit line for their projects must obtain all the required permits, including environmental permits and those issued by the Ministry of Industries," Financial Tribune quoted him as saying.

Invitalia Global Investment, the investment arm of the Italian state-owned holding, signed the agreement in Rome on Thursday based on which the funds will cover projects and joint ventures implemented by Iranian and Italian companies in such areas as infrastructure and construction, oil and gas, power generation, and chemical, petrochemical and metallurgical industries.

The finance deal marks the biggest loan by a European country for Iranian projects in the form of a credit line.

According to Salimi, Italy chose to go ahead with the deal just a day before Donald Trump was to announce his decision whether to certify the Iran nuclear agreement and thereby waive the sanctions against the country.

The White House, however, said on Friday that President Trump will again waive sanctions against Iran that were lifted as part of the landmark 2015 nuclear deal.

But the Trump administration said it was imposing new, nonnuclear sanctions in response to Iran’s ballistic missile activity and alleged human rights violations.

"The fact that this credit deal was signed before the US president announced his decision shows that Europe aims to seriously engage with Iran, because Italy could have signed the deal after Trump's decision," the MEB official added.

FX, Gold Markets to React

As to the deal's effect on Iranian markets, Salimi noted that foreign exchange rates and gold coin prices had started to rally since past many weeks.

Now, he added, because the US has stayed in the nuclear deal contrary to what Trump had suggested, markets have time to breathe.

"This decision will have positive impacts on Iran's markets and we will most likely start witnessing a drop in foreign exchange prices from today [Saturday]," he concluded.

The US dollar's rally saw it rise to all-time highs against the Iranian rial on several occasions during the past weeks when it finally crossed 44,000. It is still hovering around the same rate, but is widely expected to come down.

In midday trade, the rial was quoted at 43,890 to the dollar in the open market, according to Tehran Gold and Jewelry Union's website.

The Bahar Azadi benchmark gold coin, which had reached a record high of 15.2 million rials ($345), has started to cool down and fetched 14.8 million rials ($335) on Saturday.