Banking on Iran

BMW and Mercedes Benz Car Dealer In Tehran
With sanctions easing, German-Iranian relations are revving up. Photo: Franco Czerny/Getty Images

Franz Josef Nick was inspired during his first visit to Iran – first and foremost by the amount of German cars speeding through the busy streets of the capital, Tehran. “Made in Germany still means something here!” the 58-year-old banker with long gray hair exclaimed.

When he left his post as chief executive of the Targobank in Düsseldorf two years ago, Mr. Nick assumed his career in banking had come to a close. He initially worked as a freelance lawyer until he received an inquiry from Nader Maleki. The Frankfurt-based financial lobbyist, a native of Iran, wanted Mr. Nick to help find support for Iranian banks in Germany. A challenging idea, to say the least, but one with legs.

International sanctions due to Iran’s nuclear-related violations brought both trade and payment transactions between Iran and the EU to a standstill. These included a mix of UN, US and EU restrictions on trades in arms, oil and transfers of funds, as well as the freezing of both Iranian central bank assets and those of other major commercial institutions.

Only after the end of EU sanctions was announced in early 2016 have monetary transfers begun to take place. Since then, trade between Iran and Germany has risen by a good 20 percent; some 1,000 German entrepreneurs have traveled with delegations to Tehran to meet with potential business partners. Nevertheless, relationships remain difficult, and many German banks refuse to finance commercial deals. “Small and midsize companies would like to export much more,” Mr. Maleki said.

This year, at least one Iranian bank has the possibility of opening a branch in Germany, with four more applying for licenses from German financial authorities. Others want to follow suit: Middle East Bank and Saman Bank have identified opportunities in Germany. But will clients actually use their services? Are they welcome? And what about German businesses in Iran?

“No German bank will issue a loan for a major commercial undertaking in Iran,” said Michael Tockuss, director of the German-Iranian Chamber of Commerce, and amounts of more than €40 million, or $44.6 million, are scarcely possible. Firms seeking to sell products in Iran often can’t find a bank to handle the transactions.

This is due in large part to US sanctions. Germany’s Commerzbank is paying a penalty in the billions for violating the embargo. “Banks ignore their commercial interests because they fear the Americans,” a Commerzbank insider said. Iranian banks in Germany can’t fill the gap in financing. Some of them have been here for a long time; Bank Saderat Iran, for example, opened a branch office in Hamburg in 1962. Europäisch-Iranische Handelsbank, Bank Melli and Bank Sepah also survived the sanctions, thanks to reserve funds, but their business is sluggish. “We’re still treated like lepers,” an employee of an Iranian bank said.

Even Mr. Maleki, a die-hard optimist, acknowledges that providing merely the financial framework for new institutions won’t be enough. Insiders don’t predict a boom. Instead, many efforts by Iranian banks serve only to boost particular locations in Germany – Bavaria in particular. The state’s economics ministry in Munich has been especially active in this regard. Delegations of Bavarian companies have often traveled to Tehran and had discussions with banks there in 2016. The state’s economics minister Ilse Aigner is even said to have promised help with visas.

This year, at least one Iranian bank has the possibility of opening a branch in Germany, with four more applying for licenses from German financial authorities.

Mr. Maleki and Mr. Nick weren’t offering such coveted gifts. Still, their trip wasn’t entirely unsuccessful. Mr. Nick is currently seeking suitable space and staff for several Iranian banks. His primary focus, however, is establishing contacts with Germany’s Federal Financial Supervisory Authority (BaFin).

Its officials are said to be open to the Iranian newcomers. The official word from the financial monitors is that Iranian banks are subject to the same controls as other foreign institutions, and the examination of their owners will most likely be a drawn-out process. “They’ll take a close look there,” a banker familiar with the procedure said. The more elaborate the ownership structure is, the more difficult things are. Officials scrutinize all professional and personal relationships: No relative, even a distant one, may appear on a sanctions list.

Mr. Nick expects the licensing process to take about a year and to cost several million euros.  Only when the documentation is complete will the monitors of the European Central Bank (ECB) be contacted. “They expect to have everything in writing right at the start,” an adviser said. Larger cases can easily fill boxes. Because of space limitations, the ECB is making a concession to the applicants: Mr. Nick and other advisers are now permitted to submit a USB stick.


This article originally appeared in the Handelsblatt sister publication Wirtschaftswoche. To contact the author:

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