Banking business still being won amid crisis in Iraq
Euromoney Limited, Registered in England & Wales, Company number 15236090
4 Bouverie Street, London, EC4Y 8AX
Copyright © Euromoney Limited 2024
Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Banking business still being won amid crisis in Iraq

US-led airstrikes in Iraq have heightened security concerns among international banks and companies operating in the country, but despite the growing crisis, banking business is still being won on the ground.

Standard Chartered, which launched its Iraq banking operations in November by opening its first branch in Baghdad, has been mandated by Honeywell, the US manufacturing conglomerate, to supports its trade and cash-management operations in the country.

Honeywell is one of a growing number of multinationals, including General Electric, to have opened offices in Iraq in the past few years in pursuit of growth – and where large multinationals go international banks follow.

Gavin Wishart-large
 Companies regularly tell us it takes days or even weeks to undertake
basic transactions

Gavin Wishart

Citi opened a representative office in Baghdad last year and has since expanded its presence to Erbil and Basra, while JPMorgan has been increasing its Iraqi trade business through an agreement it has with the Trade Bank of Iraq to help it finance imports of goods and services through letters of credit. The US bank doesn't yet have an office in Iraq. 

The long-term potential of the Iraqi economy is why there is such a clamour to invest, as oil-driven growth is forecast to turn the country into one of the largest oil exporters globally within the next decade and into a $2 trillion economy by 2050, according to estimates by Citi economists.

StanChart’s main competitive advantage at this time is that it has branches in the country, enabling it to provide on-the-ground services, such as in cash management, trade and investment banking. Citi plans to open branches in Iraq too, but up until now it has been providing such services through Dubai, its Iraq-desk in Amman and from London.

However, greater investment in Iraq comes with escalated risk. US-led airstrikes against Islamic State strongholds in Iraq since early August together with more recent strikes by the UK and France have heightened security concerns among foreign banks and companies.

Staff security and ensuring the ability to operate in the country are paramount concerns, but Gavin Wishart, chief executive of Standard Chartered Iraq, says it's still business as usual for them.

“We are closely monitoring the situation,” he says. "Our branches in Baghdad and Erbil are open for business and we are operating normally."

Chief priority

That might be so, but for foreign companies one of their chief priorities will be ensuring they can pull out whatever cash balances reside in their local operating subsidiary accounts swiftly and easily.

As Honeywell’s core cash bank, StanChart will provide the cash-sweeping mechanisms for that as part of its mandate, ensuring too the company has visibility over all its cash flows in and out of Iraq.

Ciar Timon, senior regional treasury manager at Honeywell, says cash management in a country that is “relatively unstable politically and economically presents a dynamic set of risks”, but that their relationship with StanChart should help ensure the “high level of agility and visibility” that is “necessary to mitigate such risks”.      

Asked how big the commercial opportunity is for StanChart to provide cash management and trade finance services to multinational and local companies in Iraq, Wishart says only that the opportunity is “significant”.

Foreign investors now cannot turn their backs on
them because the going has suddenly got tough

Baroness Nicholson of Winterbourne

In addition to growing investment interest by foreign companies in Iraq, Wishart says another main reason is that “Iraqi banks and smaller regional banks do not have the network, infrastructure, electronic platforms, product range and depth of operational service to provide anything other than basic transactional services.”

He adds, however, that one of the main challenges for multinationals in Iraq is service.

“Companies regularly tell us it takes days or even weeks to undertake basic transactions like opening letters of credit or issuing guarantees – something we do electronically in a couple of hours or less,” says Wishart.

StanChart will provide Honeywell with trade finance guarantees through its electronic Straight2Bank platform. Wishart says the bank is mainly focused on supporting its existing multinational clients operating in Iraq’s oil and gas, telecom, infrastructure and power sectors.

Last month, StanChart was one of a group of UK companies, including Deloitte and PwC, participating in a trade mission to Erbil in the Kurdistan region of Iraq, where the airstrikes have been carried out.

The mission, organized by the Iraq Britain Business Council (IBBC), was designed to show support to the Kurdistan region and Iraq more broadly.

The IBBC’s executive chairman baroness Nicholson of Winterbourne, who led the mission, says: “The people of the Kurdistan region of Iraq have worked wonders over the last decade to create an incredibly prosperous fledgling nation. The growth of cities like Erbil has been nothing short of an economic miracle. Foreign investors now cannot turn their backs on them because the going has suddenly got tough.”

She adds: “The Islamic State is slowly but surely being wiped out. Once that happens, the Kurdistan region will be back firmly on track.”

Gift this article