Amidst US President Donald Trump’s decision to restore sanctions against Iran, Singapore-based water technology company Hyflux faces the prospect of shouldering “material adverse effect” on top of its mounting debts as a result of its decision to suspend its contracts with Water Development Engineering Company (AWDEC).
The suspension took place only eight months after Hyflux had been awarded a deal to construct a seawater reverse osmosis desalination package in Bandar Abbas, a coastal city in southern Iran.
Hyflux also indicated on Friday (14 Dec) that it did not seal a second deal for another desalination unit with the Iranian water technology firm.
As of 31 Mar this year, Hyflux had accumulated S$2.95 billion in debts. The firm has been undergoing a debt restructuring process monitored by the courts since May, which also witnessed Hyflux’s withdrawal from a Saudi Arabia project to build three desalination plants.
Earlier this year in April, Hyflux announced that it had won the first contract, which was worth S$110 million. 200,000 cubic metres of water per day was expected to be supplied by the desalination plants.
A second contract was due to be awarded in July.
Speaking to TODAY, Senior Visiting Fellow of National University of Singapore’s Business School Alex Capri said the suspension illustrates precisely how other countries can become “collateral damage” as a result of US-Iran tensions.
“The overwhelming power of American sanctions is because the US dollar is king. The entire global financial system is built to facilitate the US dollar first and foremost,” he said, ” adding that “The Fed [Federal Reserve, USA’s central banking system] would know which bank it went through and who is tied to” certain transactions.
“They would be punished… (by being) shut out of the international banking system. The bank (Hyflux uses) doesn’t want to jeopardise its relationship to trade and the US dollar,” he concluded.