Event

On 24 November, negotiations between the P5+1 (the United States, United Kingdom, France, Russia, China and Germany) and Iran on the latter’s nuclear programme were extended for a second time. As no compromise was reached on Iran’s uranium enrichment capacity and the extent of international sanctions relief, the new deadline of 30 June 2015 has been announced for the negotiations. Both parties announced that they hope to complete negotiations within four months.

Impact on country risk

As a result of this deadline extension, the existing sanctions regime (and temporary suspension of some sanctions) remains into being. It was announced last November that “nothing is agreed until everything is agreed”. Therefore, a failure to agree on a final agreement could still reinstall the suspended sanctions and result in an even more severe sanctions regime, affecting future Iranian payment morality. For the time being, Credendo Group remains off cover on Iran, taking into account the sanctions that remain in place and the still temporary nature of their suspension. On the economic front, the continuing international sanctions hamper Iran’s ability to increase oil production. As a result, the fall of oil prices this year will place an additional economic burden on the country. While it still has some buffers against a temporary fall in oil prices, Iran’s vulnerability to a sustained oil price shock is much higher than most neighbouring oil exporters, as we demonstrated in the assessment on MENA oil exporters we published last month.

Analyst: The Risk Management Team, s.vanderlinden@credendogroup.com