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Cablegate: Swedish Exports to Iran Rising

VZCZCXRO5618
PP RUEHAG RUEHAST RUEHBC RUEHDA RUEHDE RUEHDF RUEHDIR RUEHFL RUEHIK
RUEHKUK RUEHKW RUEHLA RUEHLN RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK
RUEHYG
DE RUEHSM #0717/01 3011338
ZNR UUUUU ZZH
P 271338Z OCT 08
FM AMEMBASSY STOCKHOLM
TO RUEHC/SECSTATE WASHDC PRIORITY 3838
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUCNIRA/IRAN COLLECTIVE PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY

UNCLAS SECTION 01 OF 02 STOCKHOLM 000717

SENSITIVE
SIPDIS

TREASURY FOR OFAC

E.O. 12958: N/A
TAGS: PGOV PREL ECON ETRD IR SW
SUBJECT: SWEDISH EXPORTS TO IRAN RISING

1. (SBU) Summary: Swedish government agencies and official
trade councils continue to encourage Swedish companies to do
business with Iran. Exports to Iran in the first six months
of 2008 are up 30% over the corresponding period in 2007.
Sweden has also not tightened export credit guarantees for
Swedish companies currently doing business with or wishing to
start exporting to Iran. End Summary.

--------------------------------------------- -------
BACKGROUND ON SWEDEN-IRAN BUSINESS AND CULTURAL TIES
--------------------------------------------- -------

2. (SBU) In 1979, many Iranians came to Sweden, fleeing the
revolution that transformed Iran from a monarchy under Shah
Pahlavi, to an Islamic Republic under Ayatollah Khomeini.
There are currently some 60,000 Iranians living in Sweden.
Even the youngest Iranians in the group that fled the Islamic
revolution are now adults, and many of these Swedish-Iranians
are looking to re-establish contact with Iran. Evidence of
this can be seen in the presence of a Swedish-Iranian Chamber
of Commerce and at the Stockholm School of Economics (SSE),
Sweden's top business school and the alma mater of many of
Sweden's business and industrial leaders. SSE has a student
association project called "Vikings2Iran" that promotes
cultural understanding and explores potential business
opportunities between Sweden and Iran.

3. (SBU) Sweden is an export-based country, and many Swedish
companies have traded with Iran. Volvo Trucks delivered its
first trucks to Iran in 1934 and remains Sweden's largest
exporter to Iran. Sweden and Iran signed a bilateral
investment treaty in February 2008.

----------
STATISTICS
----------

4. (SBU) The banner year for Swedish exports to Iran was
2005, with a total of $1 billion (at the 2005 rate of $1 =
SEK 7.8). After two years of steady decline, Swedish exports
slowly but surely have begun to rise again. The most
recently published trade statistics from Statistics Sweden
reveal the following:

- For the period January-July 2007, Swedish exports to Iran
totaled $208.7 million (at the 2007 rate of $1 = SEK 6.5).

- For the period January-July 2008, exports increased by
about 30% to nearly $295 million (at the 2008 rate of $1 =
SEK 6.0).

- For the period January-July 2008, Iran ranked fourth after
Saudi Arabia, the United Arab Emirates and Israel in the
Middle East for Swedish exports.

5. (SBU) Indications that Sweden continues to promote trade
with Iran are found on the following Swedish-language
websites. Post noted a significant difference in the
information about doing business with Iran available on
Swedish-language websites, compared with what was available
on the English-language websites of the same organizations.

- The Swedish Trade Council website:
"The Swedish Trade Council (STC) can assist Swedish companies
that want to establish operations or grow existing operations
in Iran. The STC offers a range of services from providing
information to strategic business development in Iran."
STC's most recent country report on Iran (2006) states that
Iran has been seen as an example of "opportunities for
Swedish companies in more distant markets, although these
opportunities have currently diminished somewhat due to
political developments." Swedish Trade Council associate
Daniel Mokari, who is based in Dubai and responsible for the
Middle East and Africa, said: "The largest export markets for
Sweden in the region are industrial nations such as Saudi
Arabia, Egypt and Iran, as most of the Swedish export
products are engineering products used in industries."

- The Swedish Embassy in Tehran website:
The Swedish Embassy in Tehran Swedish-language website has a
page on trade with Iran that says: "Iran has been one of
Sweden's most important non-European markets," and that
"several Swedish companies have a long tradition of doing
business in the country." The same page also states that:

STOCKHOLM 00000717 002 OF 002


"Iran can be increasingly seen, despite certain reservations,
as an example of the opportunities that more distant markets
can offer Swedish companies."

-----------------------
OFFICIAL EXPORT CREDITS
-----------------------

6. (SBU) According to the Swedish Export Credits Guarantee
Board (EKN) 2007 Annual Report, there has been a "greater
demand for risk cover for deliveries to the Middle East,
above all to Iran." In 2007, small and medium size companies
had the highest demand for these guarantees. The following
information is from EKN's 2007 Annual Report, which is posted
on the company's Swedish and English-language website (which
does not provide USD or SEK amounts of the guarantees):

- 36 companies received EKN export guarantees for Iran
between August 1, 2006 and July 31, 2007.

- 24 companies received EKN export guarantees for Iran
between August 1, 2007 and July 31, 2008. Of these 24
companies, all but four were among the 36 companies that had
received export guarantees for Iran in 2007.

- In 2007, Iran ranked third on the list of the top 10
countries for which export guarantees were issued for small
and medium size companies.

- In 2007, Iran ranked first on the list of the top 10
countries for which export guarantees were issued for large
companies, which was more than twice as many as to second
place Russia.

- In 2007, guarantees for exports to Iran were issued for
several different industries, including telecoms, transport,
power and industrial plants. The most common instruments
used were letters of credit and short-term loss of claim
guarantees. Exporters often needed to cover production risks
where major projects were concerned.

- In 2007, Iran ranked fourth on the list of the 15 largest
countries with outstanding guarantees, with about $1.2
million (at the 2007 rate of $1 = SEK 6.5.)

7. (SBU) According to Therese Malmberg, the Swedish Financial
Supervisory Authority, there are no Iranian banks in Sweden
and no Swedish banks in Iran. There are, however,
bank-to-bank correspondent relationships, for instance:
Nordea has correspondent relations with Bank Keshavarizi,
Persian Bank and Bank Refah Kargan.

WOOD

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