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Export & International

Iran: The door is unlocked. Will it be opened? Asks Euler Hermes

By CreditMan Monday, January 18, 2016

Ludovic Subran, chief economist at Euler Hermes, the world’s leading trade credit insurer, comments on Iran:

“Iran has completed the necessary steps in a deal to restrict its nuclear programme, and the lifting international sanctions against that programme will have a marked impact on trade, with exports and imports both potentially increasing by +20% in 2016 and imports increasing by a further +13% in 2017. There will be opportunities for exporters into Iranian metal, machinery and equipment, automotive and food markets.

“Caution is required in suggesting that we are witnessing a significant shift in global geo-politics and the adjustment period will be challenging. Some sanctions will remain in place, which will complicate business dealings, and substantial investment in infrastructure and industry is required at a time when foreign exchange and credit risks will increase and social and political expectations require management.

“Until Iran has free access to global payment systems corporates will find it problematic to conduct business with the country. International traders and investors will want to see reduced exchange rate volatility and rationalization of the current system of official and free market rates for the Iranian Rial.”

“Markets have already factored in an increase in global supplies of crude oil but prices are likely to remain under downward pressure. Much could still go wrong but if the agreement holds commercial opportunities will emerge in the energy, civil aviation and automobile sectors, with openings in tourism and retail sectors likely to follow as Iran’s re-assimilation begins.

“Initially, European exporters will benefit the most, although current market leaders, the UAE and China, will also make gains. For local industries, sanctions relief will result in marked changes in the energy, automotive, construction and retail sectors, with increasing market dynamism but also tougher global competition.”

Euler Hermes is the world's leading provider of trade related insurance solutions, helping companies of all sizes trade with confidence at home and abroad. Euler Hermes is a member of Allianz.