TEHRAN (Shana) -- Amid anti-Iran policy of US President Donald Trump, who is seeking to impose secondary sanctions on Tehran following his withdrawal from the 2015 historic nuclear deal, the director of investment at Iran's National Petrochemical Company (NPC) has good news.
Hossein Ali-Morad told "Iran Petroleum" that arrangements were made months before Trump's withdrawal from the deal to remove obstacles to banking transactions.
He said in the interview that Iran was developing its ties with Asian and European nations based on win-win policy.
The following is the full text of the interview Mr. Ali-Morad gave to "Iran Petroleum":
Let's first talk about the impact of the US's withdrawal from the JCPOA. How do you see ongoing talks with the Europeans?
Naturally foreign companies, particularly leading European firms that signed post-JCPOA, are cautious because of their shared interest with American firms. Some of them have suspended their transactions waiting for the fallout from the US's withdrawal from the JCPOA in order to be able to regulate and plan their cooperation with Iran. Therefore, the future of cooperation with foreign companies and the fate of NPC talks with foreign investors hinge on the result of ongoing negotiations between Iran's Foreign Ministry and the European Union about the JCPOA terms. We have to wait and see what would happen when the deadline set by Iran for the EU expires. We hope that this result would benefit both Iran and the European and Asian sides. The important point is that as the administrator of petrochemical industry, we are not the only side to propose cooperation with European companies, rather there are leading European firms willing to cooperate with Iran. Recently, a European company has signed the text of the agreement we had already finalized. The representative of the company insisted on meeting with me to exchange contracts. He said that the agreement was an indicator of willingness for continued cooperation with Iran to tell negotiators with the EU that a suitable solution needed to be drawn up and finalized. I deem it necessary to note here that attracting foreign investment is dependent on a variety of internal and external factors, whose resultant will decide the presence or absence of foreign investors. For instance, I can refer to the issue of compliance with international banking and non-banking regulations, know your customer (KYC), secure payment services in compliance with international relations and the Financial Action Task Force (on Money Laundering) (FATF). I see some domestic decisions like the government's recent decision to unify multi-tier foreign exchange rate as a right and suitable strategy which would help stabilize national macro economy and business environment, thereby removing a major risk to attracting foreign investment. That would positively affect international companies' decision about cooperation with Iran.
Which stage are MOUs in now?
You must know that over the past two years and due to the JCPOA overtures, a number of MOUs were signed between the NPC or leading petrochemical holdings on one side and Asian and European companies on the other, for purposes of studying grounds for cooperation and the possibility of presence of these companies in Iran's petrochemical industry in such sectors as investment, financing and supply of technologies.
At present, in light of the US's pullout from the JCPOA, these companies have slowed down and even suspended their activities in Iran and are waiting for the European governments' action to save the JCPOA and create new conditions. Of course, Chinese companies are less considerate and have expressed willingness to proceed with cooperation.
But you must keep in mind that attracting foreign investment is subject to international conditions and Iran's interactions with other nations. Many European and Asian companies were in talks for investment in Iran and transfer of technology to Iranian petrochemical companies, but this issue has been affected by political events. Now the situation has totally changed and in the aftermath of the US's pullout from the JCPOA, Iran's relations with various European and Asian nations are entering a new phase based on win-win policy. It would be wrong to conclude that the negative strategy of a country would immediately and directly affect the strategy of other countries.
I reiterate that foreign companies, particularly Asian companies, have not stepped back from Iran's lucrative petrochemical industry despite all negative propaganda spread following Washington's withdrawal from the JCPOA.
Given Trump's anti-Iran stance, unilateral sanctions will be imposed on Iran's petrochemical industry. Have you made any assessment to that effect?
Fortunately, the Iranian Ministry of Petroleum had set up six months ago a working group under the title of "Working Group to Study Solutions to Removing Obstacles to JCPOA and Banking Transactions". The NPC followed suit and set up its own working group. The idea was for companies and holdings to share experience in sanctions busting with a view to creating effective unity in this sector and prepare the petrochemical industry to face any new restrictions including secondary sanctions.
What solutions are envisaged?
The principal point is to use conditions and chances which had been ignored in the post-JCPOA era. For instance, the first point is to use domestic potentialities and persuading small and medium-sized European companies to cooperate with Iran's domestic industry, and finally using the capabilities of Russian and Chinese companies.
In the post-JCPOA era, we focused on European companies, particularly leading petrochemical firms which had big investment projects in the US. But everything now depends on the outcome of negotiations under way between Iranian and European parties.
How do you foresee the outcome?
During the pre-sanctions era I mean ten years of tough and unjust pre-JCPOA sanctions we continued with our projects through relying on our domestic capability and we were not halted. The launch of projects never stopped and we always found a solution. Generally speaking, the sanctions you are talking about are mainly economic and more precisely target the banking sector. That would affect our banking and monetary procedures more than our manufacturing. If we say that the threats we are faced with are of technological and technical nature we may not be wrong as we can turn them into a chance for the growth of domestic capabilities. Fortunately, necessary mechanisms have been worked out for the economy and the banking, particularly Central Bank transactions. Throughout [Iran's Foreign Affairs Minister] Mr. [Mohammad Javad] Zarif's negotiations, all negative and positive points will be raised, so that in case these sanctions take effect we would be able to use suitable banking approaches.
Have any new talks been held with Russia and China for alternatives?
During the last visit to Iran by Chinese president, an agreement was signed for cooperation and China's private sector investment. After that, a Chinese union of private oil and petrochemical companies signed an MOU with Iran's deputy petroleum minister and NPC managing director for the acceleration of Chinese private investment. Under the MOU, NPC will provide suitable location for investment by the Chinese party. God willing, we will see feedback in the near future. A Chinese company is strongly willing to invest in one of our country's islands, which we are following up on seriously. A high-ranking delegation and a group of their experts will travel to Iran soon so that we can finalize the basic and infrastructure issues with relevant organs and prepare the ground for the implementation of the project by that company.
So the Chinese and the Russians must have become active now.
Such dynamism existed before, particularly with the Chinese, and you must know that China is one of our target markets for petrochemical products. However, the issue of attracting investment and transfer of technology by Chinese and Russian companies tops our agenda now. Their seriousness has been proven to us. I've had talks with 40 to 50 Chinese investors, 2 to 3 of them are serious. We are following up on talks with them.
What arrangements have you made for shipping insurance?
We had similar experience during the pre-sanctions era. Through cooperation and by reliance on our own capabilities and facilities and well thought-out use of new international mechanisms, we will consider a suitable strategy.
Is there nothing to worry about as the Europeans are quitting?
I already explained about the technical and technological sections and as far as financing is concerned we believe in project fund as a good solution. Therefore, if we can either directly or indirectly engage the NPC in such projects, we will be able to create through suitable mechanisms project funds in Iranian currency and then project funds in hard currency in order to make optimal use of stray capitals which may go towards gold or housing and drive them toward petrochemical projects, in which case we may attract investment for prioritized projects.
What stage is such fund in and what would be your solution for attracting investment in case renowned companies pull out of Iran?
Preliminary steps for such fund were taken one month ago during a meeting of project managers. In the near future and owing to support from Dr [Norouzzadeh], managing director of NPC and deputy minister of petroleum, we are determined to set up a financing working group in the NPC in order to arrange activities based on changes in the international arena. The first agenda for this working group would be to establish a project fund.
Furthermore, it is evident that due to the limited financial potential of private sector investors, petrochemical project managers, as well as limited financial resources in the country; development of petrochemical industry in compliance with plans is almost impossible without foreign investment and financing through international resources. Therefore, in addition to predicting solutions like working out necessary and legal mechanisms for driving liquidity towards petrochemical industry including establishment of project funds in Iranian and hard currency with the direct or indirect participation of NPC (for instance through Persian Gulf Holding's involvement), we have to continue negotiations with European small and medium sized enterprises and with the Commonwealth of Independent States (CIS), Russia and China (which are less affected by US sanctions) and meet the financial needs of petrochemical projects.
I deem it necessary to remind two points; first and foremost, the big impact of political conditions on financing and attracting foreign investment, and second, the time-consuming process of foreign financing and direct investment. Therefore, the NPC and its Directorate of Investment adopted a three-phase financing approach to be pursued in the wake of the US's withdrawal from the JCPOA. The phases are as follows:
- Short-term financing
- Short-term financing convertible to long-term financing
- Development of long-term financing structure
In light of available instruments and given current international conditions, I personally believe that it would be impossible to jump into mid-term and long-term financing at a time the US has walked away from the JCPOA. Furthermore, we are well aware of Asian and European prime banks' agreement with and fear for the Office of Foreign Control Asset (OFAC). In other words, we know that these banks have already been fined heavily. Therefore, they stay away from Iran and become more conservative.
By taking into consideration these points, it seems that we will be following up on short-term financing. In the meantime, due to the possibility of acquiring easier insurance coverage for SME manufacturers and vendors, we can directly purchase from them.
There were recently talks with Swiss Casale. Are any other companies involved in the new talks?
Both before and after the JCPOA implementation, we had several rounds of talks with Swiss Casale. They were very willing to cooperate with Iran. During the years of sanctions, Casale was among companies that did never sever ties with Iran. Within the same framework, it is still ready for cooperation with Iran. Casale is a small-sized company, but it is proprietor of technology and we have to identify such companies and to supplant top Europeans who may pull out of Iran.
How much investment is needed for petrochemical projects?
At present we have about 63 petrochemical projects which are being operated by the private sector. These projects would need about $35 billion in investment to be completed and come online. Given the accessibility to feedstock and for the purpose of development of petrochemical industry, about 38 projects have recently been proposed, which have been authorized. These projects would need more than $48 billion in investment. You may ask how such investment would be attracted. As far as the financing of these projects is concerned I have to note that in the past when the NPC was in charge of petrochemical development projects, the NPC financial resources and even NPC-branded products were considered as financial support and were acceptable to foreign banks, financial institutes and credit and insurance agencies. Therefore, to get facilities from foreign banks, financial institutes, credit and insurance agencies, there was no need for the Central Bank or Ministry of Economy guarantees as state guarantee and loans were guaranteed and repaid by the NPC. It is noteworthy that banking facilities are being repaid. We recently finished repaying six packages of facilities granted by the Japan Bank of International Cooperation (JBIC). I hope that we can unify the petrochemical industry in the country anew in order to benefit from this lever of power to witness once more development of petrochemical sector and its blossoming. After the JCPOA implementation, JBIC granted a 650 million usance, guaranteed by the Persian Gulf Holding. Our plan both before and after the US withdrawal from the JCPOA has been to acquire short-term and then mid-term financing facilities. Due to the present circumstances, our pace has slowed down. We are waiting for the outcome of talks so that we can make required planning to reach this objective.
Do you have any plans to transfer in state-of-the-art technology?
In the petrochemical technology sector, it is necessary to support domestic companies like Petrochemical Research and Technology Company (PRTC) and domestic capabilities in order to develop modern technologies needed in this sector in cooperation with foreign companies which are ready to supply necessary technology. I am sure that after implementing each new technical and technological agreement, attraction of investment at any level and using modern technologies, the path for the development of petrochemical industry would become smoother, which would give rise to some sort of interdependence between the Iranian and global economies, which would finally result in technological growth for the country. Even if leading companies decide to pull out, we will activate new mechanisms for cooperation with SMEs, which I explained in response to previous questions, for financing by foreign investors, banks and financial institutes. That would help the county benefit from domestic capabilities to make maximum use of such cooperation. Generally speaking, in light of previous talks and based on feedbacks I have got from foreign companies, I am optimistic about the results of our new strategy.
Have you received any final message from France's Total for severance of cooperation?
As a member of working group engaged in direct talks with Total's highest petrochemical official, I have not received any direct message about Total pullout. I think that they are waiting so that they would make an assessment of new conditions and our negotiations with the Europeans before regulating their strategy.
