Matthieu VITEAU: Medium and small-sized businesses may likely do better business abroad

Matthieu VITEAU: Medium and small-sized businesses may likely do better business abroad

One of the objectives often sought by companies is to merge. Whathever the reasons presiding over such a decision, it usually results in a larger structure. Global companies have nearly all begun as a small or medium size businesses. Bigger is not necessarily better, especially when doing global business. Medium and small-sized businesses may likely do better business abroad. This assertion may prove more accurate as each day passes and larger corporations become increasingly vulnerable to extra-territorial economic sanctions when doing global businesses.

Bijan Khajehpour, a frequent contributor to al-Monitor reports in this article:

http://www.al-monitor.com/pulse/originals/2017/10/iran-financing-european-banks-japan-china-sanctions.html

foreign banks are slowly reconnecting with their Iranian counterparts and other Iranian economic agents. Amongst those he highlights are two from Iran’s main trading partners (China and South Korea), Russia, but also from Europe.

What is probably worthy of interest is the size of the European banks involved, as well as the countries they operate from. The Danske Bank is Denmark’s largest bank with a very strong regional footprint in the Baltic Sea region and with international outreach. Oberbank is an Austrian bank which capital structure is essentially made up of local and regional Austrian banks.

It is quite likely that this is no surprise for these banks to be amongst the first to venture into Iran-Europe business – and for them to feel to be “allowed” to do so by governments. I suspect the Dankse Bank and Oberbank not to be significant enough – at least not as significant as Barclays, JPMorgan and Société Générale – to warrant the attention and efforts of the Office of Foreign Assets Control of the US Department of the Treasury.

Additionally, although Denmark and Austria are member states of the European Union – and as such are as much instrumental as any other member states in the decision making process relevant to the EU’s Common Foreign and Security Policy -, they are probably perceived to have limited political interest in the eyes of the US State Department and the Treasury.

In short: any activity – be it of business and economic, political, social nature – from these countries are less likely to be noticed and impeded by international constraints.

There is no comparison to the Chinese and South Korean involvement coming with respectively CITIC group and China EXIM bank for the former, KEXIM for the latter. All three are government-owned financial institutions and both countries very likely carry a heavier weight in the US Treasury’s considerations.

Of note are both European banks’ investment policies: these promote and provide prudential services for medium size companies (Oberbank’s capital structure is especially telling in that regard) when doing business abroad and enter into international ventures. These projects do not usually draw anyone’s attention, contribute to the development of the economic fabrics at the local and regional level with possible long term snowball effects on society.

As much as all politics is local, business ties a more likely to be successful if developed at a local scale. Doing so heighten the chances no to draw international politics into deals’ decision making process, attract the attention of (international) competitors and to understand the local dynamics and complexity of the markets.

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MATTHIEU VITEAU
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