The risk of doing business in Iran is falling

Iran has paid off its debts from the sanction years. The country is nearly free of debt. The oil price has gone up. And there is also healthy growth in sectors other than oil and gas. These factors reduce the risk of trading with Iran. “Iran is, therefore, being upgraded from country risk category 6 to category 5,” says Victor Carstenius, EKN’s country analyst for Iran.

The sanctions against Iran have been eased. This means that banks can once again participate in export transactions to the country. Between 2012 and 2016, this was practically impossible. As a result, Swedish exports to Iran have almost doubled in the last year.

However, the deals involved are primarily short-term, with credit periods of up to one year, and the European banks remain cautious. The USA recently extended the nuclear energy deal with Iran by 120 days, but also declared that it would be the last extension, which is a source of uncertainty. Despite this, EKN is now changing the country risk category of Iran from 6 to 5.

“The reason for upgrading Iran is that EKN, and other export credit institutions, have had a better payment experience of Iran,” says Victor Carstenius, EKN’s country analyst for Iran, and continues:

“They have now more or less paid off the debts they incurred under the sanctions. The Iranian economy is doing better, and their oil exports are increasing, primarily in Asia, with a rising oil price. The main risk is the possibility of new sanctions against Iran by the USA.”

The strong development has resulted in EKN now upgrading Iran to country risk category 5 from risk category 6, which means a lower risk premium for export guarantees to the country. The guarantee volume for transactions to Iran amounted to SEK 3.4 billion in 2017.

EKN’s country risk classification

EKN monitors developments in countries around the world and assesses the risk of payment problems. The assessment is summarised in a country policy in which we specify the country risk category on a scale of 0 to 7. The lower the figure, the better the country's creditworthiness. Assessments are performed continually, as well as in annual regional reviews made in collaboration with other OECD countries.