New US sanctions on Iran won’t have material credit impact for EMEA issuers

Main source of risk for companies and banks will probably be around compliance: Moody’s

LONDON, June 9: Although renewed US sanctions on Iran will mean some rated debt issuers in EMEA will suffer a loss or delay of business, or will be unable to access cash flow from local subsidiaries, these losses are not expected to be significant and won’t have a material impact on credit quality, Moody’s Investors Service said in a report.

The report, “Cross-Sector EMEA, Credit impact of renewed US sanctions on Iran is not material for banks and corporates”, is now available on www.moodys.com. Moody’s subscribers can access this report via the link at the end of this press release. The research is an update to the markets and does not constitute a rating action.

“The main source of risk for companies and banks will probably be around compliance with the new US sanctions on Iran,” said Vincent Allilaire, a Moody’s Vice President — Senior Credit Officer and author of the report. “However, the relevant entities are aware of this potential threat, because previous fines for non-compliance were well-publicised and very large.

“The potential severity of a breach ensures a strong incentive for companies or banks to respect the sanctions and we expect them to comply with the new sanction regime, once imposed.”

Earlier this month, Peugeot S.A. (Ba1 stable) announced that it had started to close down its Iranian joint ventures with local auto manufacturers Saipa and Khodro Co. Peugeot is one of several EMEA-based companies that have made similar announcements since the United States said in May that it was ending its participation in the Joint Comprehensive Plan of Action (JCPOA) and was reimposing sanctions on Iran

As well as fines, companies or banks could face the risk of losing access to the dollar clearing system, itself a higher risk than lost revenue from the Iran market.