"We have been working on the subject for a long time…central banks of the two countries also are working on the issue, but the plan was halted," Yahya Al-e Eshaq was quoted as saying by ILNA on Wednesday.
The veteran businessman added that opening a joint bank is possible under the prevailing conditions. He did not provide details, Financial Tribune reported.
Iraq is Iran's second largest export destination. However, lack of normal transaction channels has become a key challenge for both sides. Trade, energy and tourism are being undermined by stringent rules and restrictions imposed by the US on Iran.
According to Al-e Eshaq, the total value of Iran exports to Iraq reached $6 billion in the first three quarters of the current fiscal year (started in March), which indicates a slight decrease compared to the same time last year.
Iran and Iraq want to boost bilateral trade to $20 billion per annum within two years.
Efficient Export Credit Agency
Al-e Es’haq said stronger risk coverage is crucial for Iranian investors who make long-term investments in the neighboring country.
"The Export Guarantee Fund of Iran, with $300 million capital, is not capable of underwriting risks of billion-dollar non-oil exports."
Based on international standards, ECA's minimum capital should equal 1% of the total export. Thus, EGFI's capital should be increased to €500 million to be compatible with international standards.
EGFI, a state-owned export credit agency, has been offering incentives to help boost trade between the two neighbors, like guarantees with 1% fee to exporters of non-oil goods to Iraq.
The fund has provided $3.5 billion in export guarantees for trade with Iraq in the past decade and paid $113 million in claims.
More recently it issued export guarantees worth $630 million for companies exporting to Iraq, which accounts for almost 40% of the fund’s total commitments.
The fund also signed a deal with Iraq’s Kurdish Regional Government, based on which a credit line worth $200 million will open for traders exporting to the region.
Trade ties with Iraqi Kurdistan has improved in recent months, says head of the joint chamber of commerce. "It has helped us compensate the lower volume of export in southern regions of Iraq.