"EGFI is set to play a more accentuated role in alleviating problems facing Iranian traders," the EGFI chief, Seyyed Kamal Seyyed Ali, was quoted as saying by the official news website of Tehran Chamber of Commerce, Industries, Mines and Agriculture.
First and foremost, the official explained, EGFI will help exporters receive their foreign currency incomes that, coupled with its endeavors to increasingly issue guarantees required by exporters, will mean that the fund will effectively replace banks in trade transactions.
The Export Guarantee Fund of Iran was established in 1973, as the first export credit agency of Middle East and North Africa region. Then, after a period of inactivity, it was reestablished in 1994 as a legally and financially independent entity, 100% state-owned and affiliated to Ministry of Industries, Mining and Trade, with the purpose of supporting and promoting Iran’s non-oil exports by providing Iranian exporters with export credit policies to cover the major political and commercial risks involved in export operations, as well as credit guarantees to help them meet their financial requirements, according to Financial Tribune.
The second wave of US sanctions on Iran's oil and gas sector, described by Washington as "harshest ever", took effect on Nov. 5 after US President Donald Trump unilaterally withdrew from Iran's nuclear deal with world power.
Some 700 persons and entities were blacklisted, 300 of whom were new additions with the rest having Obama-era sanctions reinstated. Some 50 Iranian banks and financial institutions were mentioned on the list published by the Office of Foreign Assets Control of the US Treasury Department.
The first round of sanctions prohibiting Iran's purchase of US dollars and precious metals, part of a larger move that attempts to cut the country off from the international financial system came in on Aug. 7.
Lower Service Fees
Secondly, Seyyed Ali said, EGFI will increasingly focus on reducing export risks in target markets.
In this vein, it has managed to reduce service fees in cooperation with the incumbent administration.
According to the official, fees for exporters working with neighboring Iraq have most notably been set at 1% with the same rate considered for exporters to Afghanistan.
"The average insurance premium paid by exporters stands at 0.67%," he said.
Official data disclosed recently by the Islamic Republic of Iran Customs Administration showed that during the first seven months of the current Iranian year that ended on Oct. 22, Iraq for the first time overtook China as Iran's top non-oil destination.
Iran’s non-oil exports to the neighboring country surged by 55% to reach $5.73 billion. The volume accounted for 21% of the total volume of Iran's non-oil exports during the period. Iran mainly exports liquefied gas, hydrocarbons, mineral products, fresh or frozen tomatoes and evaporative coolers to Iraq.
Exports to Afghanistan hovered around $1.87 billion, registering a 24% rise year-on-year.
A depreciated rial, which has lost significant value in recent months due to returning US sanctions, has given a significant boost to Iran's exports, especially to regional partners.
The national currency has lost nearly two-thirds of its value against the US dollar since the year's open.
As Seyyed Ali said, the fund aims to establish closer cooperation with the banking system as well.
"Furthermore, the total coverage provided by the fund is slated to exceed $2 billion," he said.
Establishing New Branches
What is more, EGFI aims to expand operations by establishing new branches. Again, Iraq and Afghanistan are prime candidates for boosting exports.
"Establishing an Iraq branch is on our agenda and the branch will be established if the proposal is approved in our general assembly and further ratified in the Cabinet," the EGFI chief said, adding that exports are a necessity under the current circumstances.
Mojtaba Khosrotaj, the head of Trade Promotion Organization of Iran, has also recently called on EGFI to establish branches in Iraq and Afghanistan.
Risks Facing Exports
Iran's exports to neighboring partners Iraq and Afghanistan have been steadily on the rise in the past few months.
However, in addition to banking and payment clearance issues caused by US sanctions, local developments threaten trade growth.
As perceived by the private sector, the most important barrier to rising trade is a currency repatriation measure devised by the government for months now, which requires exporters to sell 95% of their foreign currency yields in the government-designated system called Nima.
Forced currency repatriation, coupled with its many faults, is discouraging exporters and seriously hurting prospects of boosting trade with regional partners, private sector representatives say.
In addition to lobbying the government to forego its faulty practices, the private sector is endeavoring to alleviate banking barriers. On Nov. 4, the president of the Investment Commission of the Iran Chamber of Commerce, Industries, Mines and Agriculture said Iran is negotiating to open a special account in one of Iraq's state-owned banks to receive export yields.
Mehdi Alipour added that US waivers for Iraq from Iran sanctions mean that the Arab country can do trade with Iran without using the dollar and the account will specifically employ dinars and euros once it becomes operational.
On Nov. 6, the head of Exports Commission of the Iran Chamber of Commerce warned that officials must do more to preserve trade with Iraq and Afghanistan as regional competitors are eying those markets.
"We have great opportunities in terms of exports to Iraq, Afghanistan and Caucasian countries, but we are squandering these opportunities through the wrong decisions that have been made so far," Adnan Mousapour also told ILNA.
As Iran is engaged with in-fighting over faulty currency repatriation policies, competitors are planning to overtake markets. For instance, he said, Turkey and Saudi Arabia await the slightest slipup by Iran to replace their goods with Iranian products in the Iraqi market.
"In the countries of Caucasus region such as Azerbaijan and Armenia, Turkey is constantly planning to progress and overtake markets," the official said.
"We have lost many opportunities in Afghanistan, as Pakistan has managed to claim a major part of the country's market."