Iran sanctions shadow falls on smaller German banks

Pedestrians stand outside the Grand Bazaar outside a Bank Melli Iran Inc. bank branch in Tehran. (Getty)
Updated 27 May 2018
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Iran sanctions shadow falls on smaller German banks

  • Some German companies plan to press on with Iran dealings
  • German exports to Iran rose 15.5 percent last year

Germany’s biggest lenders have shied away from business with Iran after past penalties for breaching US sanctions, but smaller banks have leapt on opportunities afforded by the nuclear deal rejected by Donald Trump.

There are just months to go until a November deadline issued by Washington after the US president abandoned a hard-fought agreement that loosened business restrictions on the Islamic Republic in exchange for Tehran giving up its pursuit of nuclear weapons.

But some firms plan to press on in their dealings with Iran despite the looming threat of penalties.

“We will continue to serve our clients,” for now, said Patrizia Melfi, a director at the “international competence center” (KCI) founded by six cooperative savings banks in the small town of Tuttlingen in southwest Germany.

The center, which supports companies operating in sensitive markets like Iran or Sudan, has seen demand “rising sharply in the last few years, from firms listed on the Dax (Germany’s index of blue-chip firms), from all over Germany and from Switzerland,” she added.

German exports to Iran have grown since the nuclear deal was signed in 2015, adding 15.5 percent last year to reach almost €2.6 billion ($3.0 billion) after 22-percent growth in 2016.

Such figures remain vanishingly small compared with Germany’s €111.5 billion in exports to the US — its top customer.

Nevertheless, the KCI will “wait and see what the sanctions look like” before turning away from Iran, Melfi said.

Already, firms dealing with Tehran must take great care not to fall foul of US restrictions.

Transactions are carried out in euros, and the KCI does not deal with businesses that have American citizens or green card resident holders on their boards.

What’s more, products sold to Iran cannot contain more than 10 percent of parts manufactured in the US.

One of the most important inputs for the business is “courage among our managers” given the high risks involved, Melfi said.

Germany’s two biggest banks, Deutsche Bank and Commerzbank, avoid Iran completely after being slapped with harsh fines in 2015 over their dealings there, with Deutsche alone paying $258 million in penalties.

DZ Bank, which operates as a central bank for more than 1,000 local co-op lenders, is withdrawing completely from payment services there, a spokesman told AFP.
That left KCI to seek out the German branch of Iranian state-owned bank Melli in Hamburg.

Even that linkage could break if Iran’s biggest business bank appears on a US list of barred businesses as it has before.

Meanwhile, among Germany’s roughly 390 Sparkasse savings banks, business with the regime is mostly limited to producing documents linked to export contracts.
“We will be looking even more closely at those” in the future, a person familiar with the trade told AFP.

Elsewhere in the German economy, the European-Iranian Trade Bank (EIH) founded in 1971 is another conduit to Tehran.

Also based in Hamburg, it for now remains “fully available to you with our products and services,” the bank assures clients on its website, although “business policy decisions by European banks may result in short term or medium term restrictions on payments.”

Neither does the Bundesbank (German central bank) believe that much has so far changed for business with Iran.

“Only the European Union’s sanctions regime will be decisive,” if and when it is changed, the institution told AFP.

Any payment involving an Iranian party would have to be approved by the Bundesbank if things return to their pre-January 2016 state.

German banking lobby group Kreditwirtschaft has called on Berlin and other EU nations to clarify their stance — and to make sure banks and their clients are “effectively protected against possible American sanctions.”

KCI’s Melfi said time is running out for EU governments to act.

“Many firms just want to stop anything with Iran, since they can’t calculate the risk of staying,” she noted.

On Friday for the first time since the Iran nuclear deal came into force in 2015, China, Russia, France, Britain and Germany gathered in Vienna — at Iran’s request — without the US, to discuss how to save the agreement.

FASTFACTS


Natural wonders replace manmade towers as Gulf states target ecotourists

Updated 22 August 2018
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Natural wonders replace manmade towers as Gulf states target ecotourists

LONDON: Gulf tourism bodies are competing to attract “ecotourists” as they look beyond traditional attractions to generate much-needed revenues.
Dubai-based Meraas last month revealed plans to turn the emirate’s mountainous Hatta region into an ecotourism destination, siting mountain lodges and “boutique” trailers along the banks of the Hatta dam.
In Saudi Arabia, a royal order in June established nine royal reservations, to be looked after by a board of directors to preserve the natural environment and limit overfishing or overgrazing.
These are some of the efforts the region is making to attract more tourists to its “natural wonders,” with the aim of increasing the contribution tourism makes to their economies that have been reliant on oil.
To date, Saudi Arabia’s tourism sector has been dominated by those visiting for religious purposes — such as for the Hajj pilgrimage this month. Tourist visas for international visitors have been hard to obtain, though the Kingdom is looking to make it easier.
In the UAE, the average tourist is unlikely to even be aware of the mountain ranges, wadis, and nature reserves that lie just a relatively short drive from their sun lounger, choosing to spend their time in the country’s malls, hotel pools and beaches.
But this is due to change, said Anthony Hobeika, chief executive officer, Mena Research Partners.
“We expect ecotourism to be a key traction to investors during the next period, as UAE continues on its tourism push with a diversified and wider range of offerings to international as well as domestic tourists.
Meraas’ latest investment in Hatta demonstrates this potential diversification away from high-end glamor to more rustic attractions. The company’s previous developments include Dubai’s luxury Nikki Beach Residences and the Bulgari Residence.
The mock-up pictures provided by Meraas so far suggest the experience will be more “glamping” than roughing it in the wild.
“Hatta is known for its beautiful scenery — mountains, lakes, wadis, farms, dams and fresh air and the development of ecotourism demonstrates our commitment at Meraas to implementing the vision of our wise leadership by creating economic opportunities for young people,
local businesses and entrepreneurs in Hatta,” said Abdulla Al-Habbai, group chairman at Meraas in July.
Globally ecotourism is growing in popularity as a way of minimizing the environmental footprint of travel, and using tourism to benefit locals, preserve culture and look after nature.
It is a trend other areas of the Gulf have capitalized on already, said Benjamin Carey, managing director at the consultancy Carey Tourism. He has previously worked on eco-tourism projects across the Middle East and is currently working on projects in India, Laos and Yemen.
“Emirates like Ras Al-Khaimah are being very clever in terms of creating high-margin and relatively low-impact adventure tourism products in a natural heritage environment,” he said.
“They are investing heavily in marketing because they recognize the importance of destination marketing and management — and also know that the oil-rich Emirati economy needs to diversify.”
“From a demand perspective, it must be remembered that the most important markets for ecotourism are middle-class professionals and urban elites, especially those
attracted by five-star hotels in Dubai and Abu Dhabi. Glamping, ecolux, expensive mountain bikes: These are all attractive short-term adventures for (those who) want to experience “ecotourism-lite,” he said.
Last December, Oman made inroads into the eco-tourism sector, with the opening of an Arabian Oryx sanctuary to the public, giving tourists a chance to see the rare desert dweller that had been hunted to extinction in the wild.
In July, the UAE launched its National Ecotourism Project in a bid to improve its marketing of eco-attractions to tourists.
The project will promote UAE’s “natural wonders” across 43 protected areas, including the Wadi Al Wurayah Nature Reserve in Fujairah where you might glimpse a rare Arabian leopard and the Al Wathba Reserve in Abu Dhabi and Ras Al Khor Wildlife Sanctuary in Dubai where flocks of flamingos gather.
A website and app will be launched to raise awareness of these protected areas and encourage travel agencies to include them in travel packages.
“The UAE seeks to leverage the fast-paced development witnessed in all sectors, particularly in the sustainable tourism domain that includes eco-friendly flights, hotels, beaches and campsites,” said Thani bin Ahmed Al-Zeyoudi, minister of climate change and environment.
However, regional developers keen to offer ecotourism breaks will need to work with local communities, Carey warned.
“Ecotourism cannot be imposed on a community. Bedouin, even if increasingly only semi-nomadic, have traditional land rights and must be involved in destination management and development,” he said.
“A green golf course is not eco-tourism. A key dimension of eco-tourism development involves working within the limits of local resources, conserving and safeguarding natural, cultural and social heritage,” he added.
Gulf economies have increasingly benefited from the growing contribution of the tourism sector to their GDP, a welcome development given recent low oil prices.
In Saudi Arabia, the total contribution of travel and tourism to GDP grew by 4.6 percent in 2017, according to statistics from the World Travel and Tourism Council (WTTC).
Last year, the sector contributed SR240.9 billion ($64.2 billion) or 9.4 percent to the Kingdom’s GDP, with the WTTC forecasting this share will reach 10.9 percent by 2028.
In the UAE, total contribution of travel and tourism was 154.1 billion dirhams ($41.95 billion) or 11.3 percent of GDP in 2017, according to WTTC. It is forecast to rise by 4.9 percent this year. By 2028, the sector will represent 10.6 percent of GDP, according to the council’s estimates.