$1.3b Stadler Deal Imperiled by US Sanctions

EghtesadOnline: A recent agreement with the Swiss train building company Stadler may be scrapped entirely, if US sanctions are reimposed and Europe fails to guarantee Iran’s interests as promised in the Joint Comprehensive Plan of Action, the formal name of the country’s nuclear deal with world powers.

News ID: ۷۸۲۸۰۵

03 June 2018

“It is not yet clear whether and to what extent a potential contract with IDRO would be affected by US sanctions,” Stadler said in a statement shared with Financial Tribune on Thursday, referring to the Industrial Development and Renovation Organization.

“Naturally, Stadler always complies with sanctions and trade embargoes. Working in close collaboration with the Swiss government, Stadler is monitoring the ongoing situation regarding US sanctions,” the statement read.

On Feb. 28, the Swiss company was reported to have signed a contract worth 1.3 billion francs ($1.32 billion) with IDRO, based on which 960 subway wagons would be built for the cities of Tehran and Karaj. The Swiss company was designated as the financer of the project that was to have a 14-year payback period and guaranteed by the Swiss Export Risk Insurance (SERV), according to Financial Tribunbe.

The Swiss Embassy in Tehran also said in a tweet that the Stadler-built wagons will be in service by the end of 2020. However, Stadler soon denied that it has signed a contract and said it was merely a public tender.

In its statement on May 31, the company reiterated that it stands by the result of the negotiations i.e. “no contract was signed” and said it had only signed a letter of intent.

Either way, the company seemed to be committed to providing the wagons, had it not been for US President Donald Trump violating the JCPOA and immediately beginning the reimposition of sanctions on August with the rest slated for November.

On May 28, Stadler Rail sales chief, Peter Jenelten, told Swiss German-language daily newspaper Blick that “the whole thing was exclusive” and that Stadler was the only company with such a contract.

He confirmed that the Swiss State Secretariat for Economic Affairs (Seco) had already issued the export license and that the SERV was also on board.

He said he believes the deal is lost, lest a miracle happens.

“The only hope for us and the Swiss railway industry is that Donald Trump suddenly changes his mind and sanctions are abolished again,” Jenelten added.

The executive also expressed disappointment because his company was intent on seeing the deal through, but will now be most likely replaced by China or Russia.

“The Iranians cannot wait forever. That’s why the Chinese are likely to take the subway order away from us,” he said. “The Swiss railway companies have invested heavily in the Iranian market. It is frustrating that all these efforts have now been for nothing.”

Iran’s Sixth Five-Year Development Plan (2017-22) has tasked the government with increasing the share of rail in cargo and passenger transportation from the current 12% and 8% to a minimum of 30% and 20% respectively by the end of the plan.

As a result, the Iranian government has placed expansion of Iran’s rail network on top of its agenda to facilitate transportation, conserve hydrocarbon fuel and reduce air pollution and road traffic.