Iran-Europe Joint Bank Proposed to Salvage Deals

EghtesadOnline: Iranian officials, executives and pundits have on many occasions floated the idea of creating a new joint bank with European nations to secure financial ties in the face of looming US sanctions.

News ID: ۷۸۳۲۲۲

11 July 2018

Now another veteran of Iran’s financial sector also referred to the idea, saying it may be one of the few ways of salvaging Iran’s billions of dollars worth of foreign finance deals.

“Europe’s political stance is to support Iran, but we don’t know just how much they will remain committed to this in practice. Establishing a joint bank can be a good way for Europeans to show their commitment toward JCPOA in a practical way,” Asghar Fakhrieh-Kashan also told ILNA in reference to Iran’s nuclear accord.

The expert, who is an advisor at the Roads and Urban Development Ministry and a key figure in charge of negotiating Iran’s foreign plane deals, referred to the Europaeisch-Iranische Handelsbank AG (EIH Bank) as a good example of what can be done outside the US jurisdiction, Financial Tribune reported.

According to Fakhrieh-Kashan, the Hamburg-based bank has transferred more than €130 billion in money and letters of credit for Iran during the two-and-a-half years that have elapsed since the JCPOA’s implementation.

“A joint bank with Europe would prove immensely helpful for keeping Iran’s finance deals alive,” he said, adding that except for the deals with China–for railroad construction–”none of the other finance deals has turned into concrete projects for which finances could be used”.

Fakhrieh-Kashan noted that the deals are in various stages of development, i.e. either bank processes were underway or LCs were being opened, guarantees were being issued, or agent banks were being selected.

“There’s still hope for us because, for instance, in the case of the €1 billion finance deal with Austria’s Oberbank, even as the bank has announced that it will be forced to stop the flow of finance, the Austrian government is trying to keep the project alive,” he said.

Oberbank on Sept. 21, 2017, became the first European nation to sign a finance agreement with Iran following the JCPOA implementation. On June 13, 2018, however, shortly after US President Donald Trump on May 8 pulled out of the JCPOA and returned sanctions, the bank said it will be forced to withdraw from Iran because of increased risk.

Fakhrieh-Kashan, also a former Central Bank of Iran deputy for foreign exchange affairs, said Iran’s finance deals are divided into two categories.

“The first contains projects that have reached a stage that may be implemented in the foreseeable future, if a mechanism for transaction waiver is devised. But the second category contains deals whose projects take longer, but which are now effectively dead,” he said.

“I believe if a finance deal has not reached the stage of getting funds, the two sides would sit down for negotiations to find a way.  We are not hopeless and the Europeans have not failed us either.”

Iranian Ambassador to Germany Ali Majedi had said in mid-May 2018 that Tehran has taken preliminary steps to establish a bank for transactions between Iran and the European Union in euro to settle all financial issues that might arise after Washington reimposes sanctions on Iran in August.

Europe has yet to give any indication that such a proposal can be actually implemented. However, on July 4, EU gave the European Investment Bank the authority to engage in business with Iran in what can be a vital step to save the nuclear accord.