Report: Germany’s Hermes in Iran

MNA| Maryam Azish: Iran always has been considered as an eye-catching and money-spinning market for several European countries like Germany offering not only 80 million people it has but also a 400-million-people marketplace it can provide access to.

Thanks to being the safest and the most secure country in the region, Iran enjoys significantly high number of young population and educated people which make it a promising trading partner and market for foreign investments.

Following the termination of the nuclear deal between Iran and great powers, officially known as the Joint Comprehensive Plan of Action (JCPOA), the European Union countries, Germany in particular, are trying to foster their economic cooperation with the Islamic Republic.

For decades before sanctions were imposed, Germany, which enjoys the largest economy in Europe with a nominal gross domestic product in 2016 of $3.5 trillion, was Iran’s major trading partner.

This is while the gap in Iranian imports from Germany and other Western countries was subsequently filled by Chinese, Korean and Middle Eastern competitors, and now thanks to the removal of nuclear-related sanctions against Iran, economic ties between Tehran and Berlin have been flourished.

Germany’s Hermes returns to Iran

On Nov. 15, Director for Investment of National Petrochemical Company (NPC) Hossein Alimorad reported on an agreement with Germany’s Hermes Insurance Company to provide insurance coverage for investment projects in Iranian petrochemical industries.

Hermes cover is a common way of referring to an export credit guarantee (ECG) by the German government. These guarantees are an important part of German foreign trade policy and protect German companies in the event of non-payment by foreign debtors. The export credit guarantees of the Federal Republic of Germany offer an array of insurance options which are mainly targeted at exports to developing countries and emerging markets.

Alimorad described the most major plans for attraction of investment to the country’s petrochemical industry saying “a contract has been recently inked with Japan’s Marubeni Corporation to reopen a 320-million-euro Line of Credit (LOC),” adding new negotiations with yet another Japanese firm to reopen an LOC worth 640 million euros asserting “talks with the Japanese side are in final stages of drafting the contract which is estimated to be sealed within weeks.”

He also pointed to the visit of an Iranian delegation to Berlin at the invitation of Iran’s Embassy in Germany; “the trip aims to launch a fresh round of negotiations with banks, insurance firms as well as companies willing to make direct investment in the Iranian petchem industry.”

“Final agreement has been reached with Germany’s Hermes Insurance firm in the course of recent talks,” stressed Alimorad noting that the German side has agreed to take out insurance against new investments in petrochemical industries of Iran.

The NPC official also touched upon the held talks with German banks on attracting investment to the industry stating “a short-term scenario has been finalized based on which investment attraction will be performed under the guarantee of NPC as the government’s representative.”

In response to a question on the amount of investment by German companies, NPC’s director for investment said in the first step, agreement has been reached on reopening three billion euros of LOC while three to six more billion euros are expected to be opened in the second phase.

“Negotiations have also been conducted with German firms on making 12 billion euros of new investment in Iran’s petrochemical industry in addition to the three-billion-euro Line of Credit,” reiterated Alimorad adding “two senior officials of a giant German petchem company will soon travel to Tehran in order to finalize earlier talks as well as to evaluate NPC’s proposed economic projects.”

Iran’s debt to Hermes cleared

June 20, 2016, Islamic Republic’s ambassador to Berlin Ali Majedi said Iran has paid its debt to the German Euler Hermes credit institution, adding there are no more barriers on the way of German banks and companies’ cooperation with Iranians.

According to media reports, Iran owed Germany about €500 million ($578.90 million) under so-called Hermes covers.

Iranian banks and companies faced difficulties for transferring money during the sanctions’ era and foreign credit insurance agencies had to cover Iranian banks’ and companies’ due payments and now the government  has to settle all the outstanding debts to foreign firms.

Debts to foreign insurers like Sace and Coface and Hermes had stopped them from opening new credit lines for Iran.

Germans eye economic boost with Iran

On Nov 8, Visiting Minister of Economy in German state of Lower Saxony, Olaf Lies said the bilateral ties between Iran and German nations are beyond economic relations and the JCPOA has paved the way for broadening and deepening the relations between the two countries and these opportunities for cooperation should be seized.

Lies maintained that the Islamic Republic of Iran was one of the economic powers of the Middle East which had expansive trade ties with Germany and Lower Saxony before the imposition of anti-Iran sanctions.

“We are eager to continue and develop the trend of relations with Iranian companies and this feeling is reciprocal as the Iranian partners are also willing to cooperate with German companies,” he added.

Lies articulated that the victory of the JCPOA has created high expectations and the consequential merits of the deal should be taken advantage of.

“One of the big and important issues after the JCPOA is restoration of financial routines and banking transactions which need joint cooperation and endeavor to be resolved,” said Lies, adding  the German and the Iranian sides are after proving the benefits of the way undertaken for brokering the JCPOA and the valuable results of it.

Without doubt, the implementation of the historic nuclear has paved the ground for attracting more foreign investment and a large number of foreign companies from different countries, European in particular, have voiced the willingness to made investment in Iran.

Iranian officials are facilitating the investment process in Iran aimed at attracting more investors because they believe that luring the domestic and foreign investments is considered as key for settling the country’s economic problems.

The situation created after the JCPOA is a good chance for the country’s exporters and producers to collaborate with foreign companies and the reputable brands.

Nobody can deny the positive effects created by the nuclear deal because it has provided safer and more secure ground for foreign countries to engage with in Iran, the Germany in particular.