Iran's government backed export credit agency has agreed to open a US$50 million credit line that includes a letter of credit (L/C) component to help Iranian investors and exporters do more business with Azerbaijan.

The Iranian Bank for Export Development (IBED) is opening the credit line with the International Bank of Azerbaijan (IBA), one of the relatively new breed of joint stock banks established in the early 1990s after the dissolution of the Soviet Republic.

Projects and L/Cs

IBA chairman, Jahangir Gajiyev, said US$40 million of the credit is intended for projects where a government guarantee is in place while US$5 million is earmarked for L/Cs and a further US$5 million is reserved for project funding.

No funds have yet been disbursed under the programme in which Azeri firms are invited to submit proposals for support.

Closer ties

IBED's credit was offered to the Azeris during a session of the Azeri-Iranian Intergovernmental Commission on Trade, Economic & Humanitarian Co-operation.

The two oil-rich countries have signed several bilateral agreements in respect of trade and investment including a 2001 Memorandum of Understanding (MOU) between Azeri and Iranian customs bodies.

Non-oil focus

Azerbaijan sees some potential for kick starting non-oil businesses with the help of Iranian entrepreneurs. IBED's mission is to support Iranian foreign investments in projects outside the hydrocarbon sector and encourage economic and commercial interchanges with other countries.

The IBA says it is negotiating for further credit support from the Islamic Development Bank (IDB). This would help alleviate the severe difficulty Azeri entrepreneurs have experienced obtaining credit. The IDB is believed to be studying and auditing IBA's financial reports very carefully before deciding on whether to extend credit to the bank.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.