French seed maker Vilmorin said on Tuesday it was continuing some exports to Iran with the backing of a French bank, and will participate in efforts to implement a European scheme to avoid U.S. sanctions targeting trade with Tehran, Reuters reports.
Vilmorin, one of the world’s largest suppliers of seeds for grain and vegetable crops, has cited the U.S. sanctions against Iran as among the short-term risks to its activities in emerging markets, along with currency volatility.
Food and agricultural goods are not directly targeted by U.S. sanctions related to Iran’s nuclear program, but restrictions on dollar-based transactions have impeded trade.
Vilmorin is working with a banking partner that is not one of the big French lenders to finance deals with Iranian clients able to pay in euros, Chief Financial Officer Vincent Supiot said at a presentation of the company’s first-half results. “We have done a few transactions since the start of the financial year,” he told reporters. “We are going to have lower sales (to Iran) than before,” he said, adding they should amount to “several million euros”.
He declined to name the bank working with Vilmorin but said it was much smaller than the major French lenders that have U.S. activities and massive dollar flows. Vilmorin had previously reported annual sales of around 10 million euros ($11.33 million) in Iran.
While this was small compared with group sales of 1.35 billion euros in its 2017/18 year to June 30, disruption of Iranian trade could trim short-term growth prospects and was also a setback given strong seed demand in Iran, the world’s fifth-largest vegetable grower, Supiot said.
To maintain exports to Iran, Vilmorin was also exploring the potential for new local customers with access to foreign currency, and the possibility for customers to set up outlets in third countries that would then ship goods on to Iran.
The seed maker is also considering taking part in a proposed European scheme, known as INSTEX, to conduct non-dollar trade with Iran via a barter system that would avert U.S. penalties.
Vilmorin is among some 70 French food, farming and pharmaceutical firms invited to a briefing at the French finance ministry with the head of INSTEX on Thursday.
“We consider that we’ll be able to conduct sales (to Iran) this financial year with the help of our banking partner, we’ll have to see for the other scheme,” Supiot said.
France, Germany and Britain legally set up the entity in January, but it is expected to take several months before it becomes operational. The European powers must first establish a budget for INSTEX and define its rules. Iran must also set up a mirror company. Central Bank of Iran (CBI) said rececntly that it was working on such a company and that would unveil it soon.
Iran is in talks with French, British and German officials in a bid to hammer out details of the European Special Purpose Vehicle (SPV). Deputy Iranian Foreign Minister Abbas Araqchi, who was in Paris this Wednesday to hold the first quarterly meeting of parties to the deal, said he hoped "that in the coming weeks Instex would become operational,” according to Reuters. He also said an Iranian counterparty to INSTEX would be put into place before the next Persian New Year (21 March).
“This is for all goods and commodities, not only humanitarian goods,” he said after meeting senior officials from Russia, China, France, Britain, Germany and the European Union. “But maybe it starts from humanitarian in order to set the patterns for doing business with Iran. And once the patterns are set then other kinds of goods including sanctioned goods and oil of course would be added to this mechanism,” he added.
“It remains to be seen whether it can deliver the job when it becomes operational,” he said, adding that the concept could be copied elsewhere. “We decided today to create working groups on different areas such as trade, energy, transportation etc in order to find similar mechanisms like Instex in other areas so economic cooperation with Iran can be expanded,” he said.
The talks come at a time when the Iranian Foreign Ministry said a high-level technical and economic European delegation would travel to Iran in "near future" to hold talks over the scheme's details. On Tuesday, Simon Penny, most senior UK trade figure in the Middle East, Afghanistan and Pakistan, who was holding talks with Hossein Selahvarzi, Vice President of Iran Chamber of Commerce, Industries, Mines and Agriculture (ICCIMA), confirmed the news, saying the "working-level" delegation is exptected to visit Iran next week.