Less than two years after BNP Paribas agreed to pay a record $9 billion U.S. fine in part for dealings with Iran, many of the continent’s biggest banks remain unwilling to go anywhere near Iran-related business for fear that they will run afoul of remaining U.S. sanctions on the country.
That’s opened the way for Chinese and Persian Gulf lenders, as well as European institutions such as Belgium’s KBC Groep, to grab a slice of the business of funding companies’ investments in Iran.
The reluctance adds a complication for manufacturers from Airbus Group to PSA Group, the maker of Peugeot cars, as they seek to capitalize on growth in Iran. The funding issue has become a financial diplomacy hot-spot.
In France, the government, worried that companies may lose exports, has started talks with the U.S. Treasury’s Office of Foreign Assets Control to get a commitment that banks can do business without incurring legal woes, two people with knowledge of the matter said.
“Banks want the maximum certainty,” said Tanguy Coatmellec, a Dubai-based partner at Ernst & Young’s financial-services advisory group. “A big part of the risk is really the U.S. political position over the long term. Either financing methods will be found or these contracts won’t be finalized.”
France’s Societe Generale, Germany’s Deutsche Bank, Zurich-based Credit Suisse Group, ING Groep in the Netherlands and the U.K.’s Standard Chartered are among the big European banks that say they’re generally not prepared to do business in Iran yet.
The United States, Russia and European countries in January lifted a series of economic sanctions in exchange for Iran’s agreement to curb its nuclear activities. Still, significant restrictions remain on Iran to combat terrorism support, human rights abuses and ballistic-missile development.
A crucial ban remains on dollar-denominated trades related to Iran, scaring away most large European banks.
The U.S. will work to clarify the existing “confusion” among some foreign banks, Secretary of State John Kerry said April 22, before a meeting with Iranian Foreign Minister Mohammad Javad Zarif.
He stopped short of saying the Treasury will issue guidance elaborating on permitted transactions, encouraging banks instead to reach out with questions. “When in doubt, ask,” he said.
French companies have been among the most aggressive in pursuing Iranian deals. More than a dozen top managers for companies from builder Vinci to Aeroports de Paris flew last month to Tehran with Transport Minister Alain Vidalies as Air France restarted its Iranian route after an eight-year break.
While French businesses this year have pledged more than $30 billion of investments in Iran, it remains unclear how recent business agreements will get bank funding.
“The situation today is still a bit premature to have a position there,” BNP Paribas Chief Financial Officer Lars Machenil said Tuesday in a Bloomberg Television interview when asked about the bank’s plans to finance companies signing deals in Iran.
Societe Generale doesn’t plan to restart activities in Iran given the uncertainties that remain, the bank said in an emailed statement Thursday. “The differences between European and American regulations lead to strong operational risks for financial institutions,” the bank said.
Executives from large European lenders have been mostly absent from recent business delegations to Tehran. In a rare trip by a banking executive, Mediobanca CEO Alberto Nagel visited Tehran in April as part of an Italian group led by Prime Minister Matteo Renzi.
Given the size of the fines that the U.S. has imposed in recent years, large banks with dollar operations prefer not to re-enter the Iranian market as long as the identity of the next U.S. president is unclear and given that Republican candidates threaten to revise the nuclear accord, Ernst & Young’s Coatmellec said.
Chicago Tribune, May 8th, 2016
