Friday, 25 May 2012

Iran: Bank Tejarat funding

Bank Tejarat has signed an agreement with the National Iranian Oil Company (NIOC) to provide financial facilities for key oil sector projects. The bank will provide loans to ICOFCo and Arvandan Oil and Gas Production Company as two major NIOC subsidiaries.

Tejarat has already played a strong role in providing the funds for oil projects by selling rial and euro bonds to domestic and international investors. It is a key domestic bank with extensive financial resources. At a time when sanctions are preventing international financial institutions from funding Iranian energy projects, it is natural for the country to turn to domestic sources.

What is not clear is how successful the mechanism will be, particularly in light of the mistrust that banks have of the government when it comes to returning the funds it owes them. Last month, media reported that the government had withdrawn major amounts from the banks without their knowledge to pay for subsidy reform handouts. The government said the amounts were the difference between the official rate of the dollar and the rate the banks had sold to the public.

This immediately drew strong criticism from the Majles and the banks themselves. There has been no indication whether the funds have been returned. Additionally, the case is being scrutinised by the Majles, with MPs saying that they could take it to the judiciary as a matter of state misconduct.

For more news and expert analysis about Iran, please see Iran Strategic Focus.

© 2012 Menas Associates

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