Iran is taking the most vital step toward reviving foreign trade, activating banking and insurance ties in time for removal of sanctions to process transactions.
Foreign companies seeking to enter the Iranian market have to get banks on board to open letters of credit and insurers to underwrite critical export-related risks – an arrangement which is currently non-existent due to sanctions.
With the lifting of sanctions on the horizon, European governments are up in arms to smooth out hurdles on the way of the world’s biggest economy rejoining the global trading and financial system since the break-up of the Soviet Union.
On Monday, Italy’s major export credit agency SACE signed three MoUs with Iranian banks as a delegation of about 360 Italian traders continued their meetings with officials in Tehran, including Iran’s top banker Valiollah Seif.
SACE has already agreed to provide insurance coverage to Iranian industrial, construction and infrastructure projects worth at least 3 billion euros which will be provided by Italy’s investment bank, Mediobanca.
Deputy Minister of Economic Development Carlo Calenda said Italy will open the credit line a day after a nuclear accord signed with Iran in July goes into effect.
Representatives of 11 banks tagging along with him in the visit to Tehran process more than 50% of banking operations in Italy, the IRNA news agency quoted him as saying.
“We have decided to remove all banking barriers between the two countries,” he said.
Calenda said the main MoU with the Central Bank of Iran will be signed during President Hassan Rouhani’s imminent visit to Italy, which will re-open banking transactions between the two countries.
Projects for cooperation
Italy remains one of Iran’s main commercial partners. Annual trade stood at $7 billion before sanctions slashed it to $1.5 billion. According to SACE, oil and gas, automotive, defense, transport and real estate offer the best opportunities for cooperation.
For Iran, the key to rekindling foreign trade is that the country’s banks become able to reconnect to the SWIFT financial-transactions system.
Chairman of the Iran-Italy Chamber of Commerce Ahmad Pourfallah said Italy had decided to resume banking ties with Iran by using its smaller banks which are not connected to SWIFT because “bigger banks are awaiting removal of sanctions”.
Meanwhile, head of the Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO) Mehdi Karbasian said SACE had offered to provide insurance for up to 5 billion euros of mining projects in Iran.
He made the announcement after meeting SACE’s Giovanni Castellaneta. Karbasian said the Italian agency had underwritten major steel and aluminum projects in Iran before sanctions were imposed on Tehran in 2012.
“In recent months, some MoUs have been signed with Italian companies in the steel and aluminum sectors, for which SACE can provide insurance coverage,” he said.
Representatives of steel group Danieli, energy company Enel, agricultural machinery maker CNH Industrial, Telecom Italia and several banks were among the Italian delegates in their visit which ended on Monday.