Heinrich Matthee


Since the nuclear deal, European companies have been flocking in trade missions to Iran. These companies often also enjoy the support of national and regional governments from Germany and France to Italy or the Netherlands. However, their main obstacle at present is the lack of active support by their preferred financial lenders.
Several major European banks have stated that they are not prepared to do business in Iran at this stage. These banks include Germany’s Deutsche Bank, Zurich-based Credit Suisse Group and the U.K.’s Standard Chartered.
The considerable potential in Iran is as apparent to these banks as to European companies. The inhibitions of European banks are rooted in the USA. They remain scared of running afoul of remaining US sanctions on Iran.
Painful recent examples keep them alert to the potential drawbacks. BNP Paribas had to pay a record $9 billion US fine partly due to its dealings with Iran. The German Commerzbank agreed to pay $1.45 billion in 2015 in an investigation into whether it breached US sanctions against countries including Iran.
Thus, a major French bank like Société Générale indicated in May 2016 that it does not plan to restart activities in Iran given the “strong operational risks for financial institutions.” SWIFT, the global bank transactions network, has been reconnected to Iran, but remains dormant.
It will for now remain difficult to finance major projects and operations. European businesses will either have to find funders or the contracts will not be finalized. For smaller projects, European businesses may find lenders like the Belgian KBC and smaller German banks. Invoicing in Euro and other non-dollar denominations will remain advisable for some time.   
However, for bigger projects, the funding issue will remain and has now landed on the agenda of European economic diplomacy too.

Several European governments have started talks with U.S. authorities to get a commitment that banks can do business without incurring legal woes.
European trade diplomats indicate that there is progress but that it will take time to resolve all the issues. There have been tense US-Iran relations for almost a quarter-century. The financial issue clearly remains a bargaining chip for some US actors.
The US political position over the long term will also play a role in the reticence of some European banks. After all, the outcome of the US presidential elections in November and the actual policies of a new president remains unclear. These banks do not want to be caught in a new political minefield.
Thus, for major projects, the funding issue will take time to resolve. It will also remain important for many European companies to understand the ownership and control of their counterparts in Iran. External stakeholder and reputation management and embedding corporate governance standards in their operations remain on the agenda of many.
In this regard, a remark by Hans-Peter Rapp-Frick, the CEO of the German regional trade association SIHK, deserves attention. One of the biggest drivers of Iranian-European business ties is that Iran’s actors do not only want to conduct business, but that people also want to continue building something of value in Iran.  Despite current obstacles, Iran’s potential will continue to attract European business interest. Those businesses with a longer view, persistence and a commitment to Iranian society will have the greater chances for success.   

Dr. Heinrich Matthee is a director of JISR, an EU-based strategic advisory firm.

Published: 13 June 2016

French Parliament Speaker Claude Bartolone said the Middle East will see no lasting peace without Iran’s participation.

Bartolone made the remarks on Thursday in a phone conversation with Ali Larijani to congratulate him on his reelection as the Iranian parliament speaker, Press TV reported.

“I believe the most important issue today is the fight on terrorism which Iran should play its role in this regard,” the French speaker said.

“Without Iran, the region will not witness a lasting peace,” he added.

Iran is helping Syrian and Iraqi governments to drive out foreign-backed terrorists from the two Arab countries.

The Islamic Republic is one of the key partners to Syria peace talks which are currently suspended after a Saudi-led delegation abandoned the negotiations in Geneva.

Bartolone said he will visit Tehran in “the near future,” adding there are important issues for consultation between Iranian and French officials.

Hassan Rouhani visited Paris in January, part of the first European visit by an Iranian president in 16 years.

The trip, which followed Rouhani’s visit to Rome, aimed to boost Tehran’s trade with Europe after years of sanctions.

“Bilateral ties and expansion of economic relations between the Islamic Republic of Iran and France entered a new phase” with President Rouhani’s visit, Bartolone said.

The speaker said France is interested in interaction with Iran in such fields as the fight on terrorism, expansion of bilateral ties and cooperation between Iran and the EU on guaranteeing peace and stability in the Middle East.

Despite France’s tough line during negotiations for a nuclear deal, Paris and Tehran traditionally have had a special economic relationship.

Aviation, automobiles, and oil are three key industries on which their economic cooperation is based.

Iran is in the process of buying 114 Airbus jets and has announced its decision to buy 40 French-Italian ATR planes.   

In the automotive sector, France’s Peugeot-Citroen is set to sign contracts with Iran Khodro and Saipa, Iran’s two largest automotive manufacturers.

The French energy giant Total is also resuming its activities in Iran’s oil and gas sectors following years of a strong presence in the country.

Published: 12 June 2016