Something one of our overseas sales managers said during a meeting;
The f***ing Americans imposed sanctions against the Iranian Revolutionary Guards, and the Melli, Mellat and Saderat Banks. Because of those f***ing Americans, our bonds from those banks are worthless! How’re we going to get payment from the Iranians without those bonds?
37 Comments
Dealing with crazed Islamo-nutters is a bitch, ain’t it?
Check the f***ing subscription agreement and conditions and see if you can find a way to f***ing collect on your f***king coupons.
Tough f***ing kimchee.
Doesn’t it just suck when the third part of the equation:
Emerging markets = hi risk = hi reward
doesn’t pan out?
Made a couple offshore investments, myself. Never even considered Iranian bonds. Maybe someone should put me in charge of the Korean pension fund.
No way. The Korean Pension Fund is for “national” investments — like the Yongsan redevelopment, 150-story finance hubs, and the canal across the country.
F***ing a!
wow, even libs are in on this one. No war in Iraq, Iran. Leave Iran alone.
But when it’s KOREANS getting screwed over because of Iran, then, you turn into a proper patriotic Republican conservative, who denounces money going into terrorists.
I’m disappointed with you, dogbertt. You’re not a true lib. You see, you had no reason to flee America because of Bush.
Will heads f***ing roll?
‘How’re we going to get payment from the Iranians without those bonds?’
Well, you could take crates and crates of locally-made rocket parts in kind.
Wanna bet these locally made parts are North Korean?
10 comments in and I don’t think it’s clear what’s actually going on here. Actually, Korea - Iran trade flows have been pretty healthy in recent years, I would imagine general Korean export materials e.g. consumer electronics, cars, steel, chemicals, ships etc, probably backed up with a good few export guarantees from the government.
So why then are this company interested in Iranian bank bonds? Were they given bonds as collateral for extending longer trade terms? (Korea / Iran, I would imagine could be 6-12 months, even more). And otherwise, how does a Korean company actually buy Iranian bank bonds in the first place? It’s not like you just call up your broker now…
why indeed did they have iranian bank bonds? that’s a real gamble there.
maybe you can suggest they start looking at the karachi stock exchange to make their money back…
OK, time for me to answer questions about the bond. When Korean construction companies build plants in Iran, they take out bonds from local Iranian banks. I don’t know the reason why, since my work doesn’t involve dealing with foreign banks, I just know they get them, in order to receive payments for the services rendered. To get those bonds, Korean companies usually turn to the Melli, Mellat and Saderat Banks, since they are the largest and well known of the banks in Iran. With sanctions imposed on those banks, those bonds now are little more than worthless pieces of paper. So, for Korean companies the road to receiving payment from the Iranians is more or less blocked.
I believe mins0306 works for a construction firm here; Korean commercial/industrial engineering firms have been running projects in Iran for some time. At the risk of talking out of turn, I’d guess the bonds are connected with some project they’ve got.
You know, if they ended doing the deal for rocket parts instead, they could even move them to a third party via transshipment of ‘construction equipment’ to some conveniently located and ultra-lucrative new project.
Oops - sorry for taking a break while typing my comment above - looks like mins explained it.
“the canal across the country.”
Don’t get me started on that white elephant/ecological disaster in the making.
I though there was an Islamic prohibition against interest. How could the Iranian theocracy allow bonds to exist in their country? Maybe these are not bonds in the same way we think of them in the non-theocratic world?
original post: “…How’re we going to get payment from the Iranians without those bonds?”
From #11 luweiqd: “…why…[is] this company interested in Iranian bank bonds? Were they given bonds as collateral for extending longer trade terms? …otherwise, how does a Korean company actually buy Iranian bank bonds in the first place?…”
#13 mins: “…time for me to answer questions about the bond. When Korean construction companies build plants in Iran, they have to take out bonds from local Iranian banks. I don’t know the reason why, since my work doesn’t involve dealing with foreign banks, I just know they have to get them, in order to receive payments for the services rendered….”
Being a simple-minded f-ing American, I too (like #11) was struggling to grasp this. Let me see if I understand — this Korean company (and presumably others?) is accepting Iranian state debt instruments in payment for their services? In lieu of cash on the barrelhead, or perhaps a “barter” arrangment (ie barrels of oil?)
Don’t answer me mins if you feel any further comment by you might jeopardize your job. I’m just incredulous that any Korean company with an international focus would be unaware of the geopolitical risk involved in any long term deals with Iran.
But it’s a damn good deal for the Iranians, as well as smart — getting a US ally to accept their debt as a way to try to put indirect pressure on the Americans.
If I’m correct in my understanding of what’s going on — here’s one possible way for the company to escape its dilemma (not that they need or want my advice):
— get ROK government to take the bonds at full value plus accrued interest. (One would think the company would have made that part of the original deal, so in the event of the bonds becoming illiquid due to this type of political risk there would be no need to curse the f-ing USA).
Plenty of ROK taxpayer money for the North — why not some for its own constituents?
#17: “I though[t] there was an Islamic prohibition against interest. How could the Iranian theocracy allow bonds to exist in their country?…”
Good question. A “bond” by its very nature implies an interest-paying debt instrument in the western sense of the word.
I think remember reading somewhere that this is dealt with by the various Islamic countries by making a distinction between what they will do for business deals with non-Muslims, or even with other, more secular-minded Muslim governments — vs what they will do for their own citizens. I.e., an Iranian citizen may not be able to buy Iranian state bonds and earn interest on them — whether the interest be paid by coupons, or just by appreciation in their price.
Maybe the Iranians could pay the Koreans in U.S. beef? HA!!
Oh Boo F**king hoo!
Let me back mins up on this one and say that many big Korean companies, especially with those trying to GAIN an international focus, have some serious issues.
1. Many fall in to the trap of “we aren’t as big as the other American and European companies, so we have to take the second tier investment opportunities”.
2. Others just seem to be relatively ignorant about what in going on in those countries, because the Korean media doesn’t seem to cover things like other countries seizing foreign assets and ignoring their own rule of law, impending sanctions as the English press does. They tend to brush off signs of serious disaster with a false sense of security (see #3)
3. Still others seem to think they can just bribe their way out of trouble, or bribe their way ahead of other (often Korean) companies. Korean companies tend to go wherever other Korean companies go too. So wherever they go, they end up in a bribe war with each other shoveling money at local politicians to get comities dissolves and rig bids etc…. Regardless they have a false sense that they can just shovel some money around under the table and make the problems go away.
So what we have are Korean companies investing in these shady countries, like Iran, doing shady business and getting what comes to them. Now I am not accusing mins’ company of all of these problems, but I can certainly see how a Korean construction company could end up in a position like this.
…Also let me make a distinction with b2b companies and those that just want to go somewhere and sell choco-pies and LCD Screen TVs to consumers… The latter seems to do pretty well (Samsung in Russia!)… whereas those who want to go off and invest in an oil field in Russia better bring copious amounts of Vaseline for when uncle Gazprom starts thinking their corn-hole looks pretty.
You are so mentally deficient, it pains me to even attempt to correct you.
1. I don’t support aggressive action against Iran;
2. The overall situation in the U.S. has very obviously deteriorated dramatically during the Bush regime;
3. I’m not a liberal, you’re right about that;
4. When I read the post, I was not thinking that it was Koreans getting screwed;
5. You know nothing about finance — my post evidences no schadenfreude (look it up);
6. For all you know, I work for an employer that has also suffered to some extent due to U.S. financial sanctions targetting Iran.
Bonds are a normal part of large-scale infrastructure construction projects that cost billions of dollars and take years to complete (bid bonds and completion bonds), but these are more insurance than financing. Mins is not describing bid bonds here.
From my reading of mins’ crytic narrations, it sounds like this happened: Korean company bids for major construction project, competing against major (but non-US) internationals. When one buyer (Iranian gov’t) with multi-billions faces a small number of large bidders, many things besides price can be negotiated (offsets, for eg.).
It sounds like the winning bidder was obliged to buy a bond from an Iranian bank. Effect is that Korean company transfers a large pile of (US dollars) with Iranian bank, receives interest on that money for a few years, finally gets reimbursed the principal. Meanwhile, Korean company does the work, finally gets paid for the project. Result: Korean company made a cash loan to Iran in order to win the contract.
OK, fine. But why? Iran is a huge oil exporter. At current prices they should be in huge surplus, like the Gulf countries are. Why would they need a loan from a Korean construction company?
Could be some sort of quasi-legit laundering operation by which the Korean company leveraged (and re-leveraged) the bonds to use the proceeds in Iran somehow. Could be that the bond interest was zeso, effectively making a gift (bribe) of the real value difference after a few years in Iran’s high-inflation environment. There’s no accounting disclosure on this transaction…so it’s all guesswork.
You do mean cryptic? Linkd, you give me too much credit for narration of a matter that I really have little knowledge and understanding of.
Your concern for my job is appreciated, but there’s nothing here that will jeopardize my job. Anyways captbbq more or less answered your comment, so I’ll leave it at that.
them mofos is fucked
Just a loan in an accounting sense. Let’s say part of the deal is that the K company agrees to employ 1000 Iranian workers at $100 per day for 2 years, and buy $100m worth of concrete from an Iranian supplier. It would be aggressive, but not necessarily unethical, for the Iranians to ask that that amount of money be ‘deposited’ in Iran, in the form of a bond purchase, prior to work commencing. It’s effectively a loan, but not called a loan. And if the K company fails to complete the project, of course they won’t collect the principal.
It’s quite shocking that they didn’t consider the risks of doing business with the Iranians. If the average Korean doesn’t or won’t get paid because of this, my heart goes out to them. However, ya takes your chances in this kind of situation. It’s no secret that the US and Iran have been butting heads for over twenty years. The Koreans have no one to blame but themselves, but of course they will never accept responsibilty for their actions.
One of the benefits of investing somewhere nobody else will touch is that you get a virtual monopoly. Go to Uzbekistan, most of the cars you see on the road are Daewoos (they’ve built a factory in the Ferghana Valley, where Andijan is located). Hyundai’s planning to follow suit. In Turkmenistan, drive down the highway in Ashgabat, and you’ll see LG and Samsung billboards interspersed with portraits of the leader (Niyazov when I was there, not sure if it’s the new guy’s portrait now). More on this here:
http://www.ethicalcorp.com/con.....entID=3788
So for every story of getting burned in Iran or Burma, there’s “success” stories too.
Well the US has been head-butting Iran for over 20 years and longer. That’s no reason why other countries shouldn’t do business with the enemies of a rogue empire. I respect the Koreans for their high-risk economic partnerships with Iran. The risk has little to do with Iran itself, depending much more on the unpredictable moves of the lunatic rogue empire. So the Koreans are correct in their analysis and quite right to heave expletives and general disgust at the “fucking Americans” for its new outrages against the international community.
“WASHINGTON, Oct. 28 (Xinhua) — There is no evidence that Iran is actively building nuclear weapons, said Mohamed ElBaradei, head of the International Atomic Energy Agency (IAEA), in an interview with CNN on Sunday.”
…and modelling the latest line of iconic Che Guevara armchair revolutionary wear…
#28 Although I don’t share your rabid anti-American stance, I also believe S Korea has the right to do business in Iran. However, as I said, “ya takes yer chances” in such a volatile situation. Considering the US and Iran have had a less than cordial relationship since 1979, I’m not surprised at what happened. Koreans have benefited more from their relationship with the F’ing US than with Iran, but you’d never know it. Of course, Korean nationals will never agree with me on this point.
#31: “I respect the Koreans for their high-risk economic partnerships with Iran…”
Well, in the cinema verite that constitutes today’s “international community”, respect is what it’s all about, baby. You’ve got to get right in the face of those rogue empires with hand-held cameras (& maybe a few RPG’s) & let ‘em know what’s what.
So let’s hope the ROK’s take heed of what you say and send those f-ing Americans packing. To do otherwise would be most gauche. A triad of the ROK-DPRK-Islamic Republic of Iran Presidents, posed together arm in arm, would be the thing — wherein to catch the conscience of the world.
Not to mention the helpful effect it would likely have on the likelilhood of the Iranians paying off their own bonds. No reason why doing good shouldn’t also mean doing well.
In any case, I believe the Koreans at said company have over-reacted. Washington doesn’t govern the world yet, and US sanctions on Iranian banks are limited in effect to business with US citizens and assets under US jurisdiction. International banks may, of their own volition, act in accord with the sanctions. But without knowing the details of the Korean-Iranian transaction, it looks on the surface like the sanctions wouldn’t have any impact on bonds held by Korean companies, since I’m sure the Iranian banks would wish to honor their agreements.
For what it’s worth, I think it makes more sense if we are talking about bid bonds here (e.g. a performance guarantee) and not the kind of bonds which pay you a fixed return until maturity.
So the Iranian company ask their Iranian bank (Melli etc) to provide a guarantee to the Korean company that essentially means the bank pays if the Iranian company doesn’t. There are (were) banks in Korea who would take Iranian bank risk (indeed Melli Bank have (had?) a branch in Seoul).
So, as the sales rep rightly points out, if the company defaults, even if the Iranian bank wanted to make good on its guarantee, the effective lock-out of Iranian banks from the global financial system (just like for the Norks) makes it damn difficult for them to actually pay up. So the guarantees (bonds) are worth pretty much nothing.
And there’s no interest involved so it’s Islamic (although I think Islamic finance is more a Sunni thing than a Shia thing).
Makes more sense than there being some kind of liquid debt markets in Tehran…
#35 “International banks may, of their own volition, act in accord with the sanctions”… but the US is really coming down with a hammer on any bank doing anything with Iran. So what this means is that, sure, banks can still do Iran business, but the cost of doing this is that they won’t be able to make payments in US dollars for any of their customers (USD payments all clear through the US). A big ask.