European banks, businesses cast wary eye amid Iran nuclear row

London (Platts)--3Feb2006

The current tension between US/Europe and Iran over its alleged plan to
develop nuclear weapons has several European banks that are financing Iran's
petrochemical expansion concerned, industry sources said. The banks are 
watching the current friction closely and treating developments in the
political situation with caution. However, the banks are still maintaining the
credit lines to that country, sources said. 

     "We are monitoring the situation. We are not withdrawing from any
projects in Iran," a source at French financial institution Calyon said. 

     "The political situation is challenging," a source at HSBC said, but
declined to comment if the bank had stopped its financing facility to Iran. It
was also unclear whether Deutsche Bank, one of Iran's largest lenders, would
continue to finance projects over in Iran. "It's a sensitive issue, and we
can't comment on our position," a source at the bank said. 

     Apart from Deutsche, HSBC and Calyon, Iran's massive petrochemical and
oil projects have attracted financing from a consortium of major European
banks, including Standard Chartered, Natexis,  Banques Populaires, BNP
Paribas, Commerzbank, ING, and SG Corporate & Investment Banking. In addition,
Asian financial institutions such as Japan Bank for International Cooperation,
and Korea's EXIM Bank, have also ploughed a lot of money into Iran's
petrochemical projects. The Japanese bank in August 2005 provided export
credit to the National Petrochemical Company of Iran amounting to $59-mil,
while it provided a supplier's credit of about $89-mil for Itochu Corp, which
has equity stakes in Iran's Mehr Petrochemical Co.

     Meanwhile, some industry observers said that companies involved in Iran
have cited concern that their credit ratings could be potentially downgraded.
But an analyst at a ratings agency said the outlook for most European
companies with projects in Iran, were still stable. "There has always been
tension in one place or another, but that hasn't stopped investors from
financing projects in those countries. The situation (in Iran) is not serious
enough to warrant any ratings action (for the moment)," the analyst said. 

     However, one source at an engineering company involved in Iran said he
expects banks would charge a higher premium for export credit, and this would
add about 1% to the company's total project costs.

     Although the International Atomic Energy Agency, UN's watchdog atomic
agency, has put off a decision on whether to send Iran to the UN Security
Council, market sources said that any planned economic sanctions on Iran,
could be difficult to implement because Europe collectively has huge
investments in that country. 

     Major oil and petrochemical companies such as Total, Shell, BP, Norsk
Hydo and Basell; and engineering companies Lurgi, Uhde, Tecnimont, Johnson
Matthey Catalysts and Davy Process Technology, all have business ventures in
Iran. And some of these companies are worried the situation between Iran and
US/Europe could take a turn for the worse.

     "We have personnel there and we worry about them. But we will go ahead
with our projects there and try to complete the projects as early as
possible," a source at Lurgi said. "Only if the German government tells us to
pull out, then we will go."

	   ---Nidaa Bakhsh  nidaa_bakhsh@platts.com
	   ---Shahrin Ismaiyatim  shahrin@platts.com

     For more information, take a trial to Platts Petrochemical Report at
http://petrochemicalreport.platts.com.

Please visit: www.platts.com

Their coverage of energy matters is extensive!!.