AP - The nuclear deal is done. Now it’s time to talk business. While it will likely be months before sanctions on Iran ease, business and political leaders are wasting no time in trying to tap into a large, and what they hope will be lucrative, Iranian market.
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Germany is dispatching a large trade delegation to Tehran on Sunday. Spain has a similar trip planned, and France’s top diplomat is eyeing a visit too. Ads for European cars and luxury goods are starting to reappear in Tehran. Airlines in Dubai are fast adding new Iran routes to meet growing demand.
American firms, though, have to be much more cautious. Deal or no deal, U.S. sanctions not related to the nuclear program will still be in place and bar most U.S. companies from doing business with Iran.
That means they stand to lose out to European and Asian companies – some that had business contacts in the country before sanctions were tightened in recent years. “It’s easier to say who is at a disadvantage. And that will be U.S. firms,” said Torbjorn Soltvedt, principal Mideast analyst at risk advisory company Verisk Maplecroft.
On paper, Iran holds plenty of promise. Two and a half times the size of Texas, it is home to some 80 million people, sits atop the world’s fourth-largest oil reserves and the second-biggest stores of natural gas, and has well-established manufacturing and agricultural industries contributing to a $400-billion economy.
London-based Capital Economics estimates the economy could surge ahead by 6-8 percent annually over the next several years as sanctions ease. “Everything is in place for economic growth,” said Dominic Bokor-Ingram, portfolio adviser at British asset management firm Charlemagne Capital. Earlier this year, his company announced a plan to launch Iranian investment funds in partnership with an Iranian company.
“Iran has infrastructure, it has the institutions, it has the education,” he added. “It has a lot of highly educated people who will go back to Iran if sanctions are lifted.”
Tapping the market won’t be easy, though. The elite Revolutionary Guard is deeply involved in the economy, and corruption is such a problem that President Hassan Rohani lamented late last year that once-secret bribes are now being handed out openly.
Iran ranks only 130th out of 189 economies on the World Bank’s ease-of-doing-business list.
Assuming the deal goes ahead as planned, it will still take at least several months until nuclear-related sanctions are lifted. And those sanctions can quickly be slapped back on if Iran fails to keep its side of the bargain. That means many multinationals are unlikely to commit to big investments in the immediate future, though the staggered sanctions relief also gives companies time to gear up their operations, analysts say.
The oil industry is one area where Iran could use outside investment. Fitch Ratings expects it will take years for Iran to get back to the roughly 2.5-million-barrels a day it was exporting before 2012, because investment in the sector has been limited under sanctions.
Chevron Corp. spokesman Kurt Glaubitz said the company is reviewing the nuclear deal to understand its implications, but for now it remains “in strict compliance” with U.S. and international laws. Exxon Mobil Corp. declined to comment.
Another area ripe for deal-making is Iran’s creaking aviation industry. Sanctions have made it impossible for Iran to buy new Western-made planes, and difficult to acquire spare parts for the planes it does operate.
An earlier, interim nuclear agreement gave Boeing and engine-maker General Electric the green light to provide some spare parts for U.S.-made planes in service in Iran since the 1970s. Boeing says it has only sold one spare part, along with some service bulletins and other materials since that deal came into force last year.
The latest agreement allows for licenses on the sale of commercial aircraft. Iranian Transportation Minister Abbas Akhoundi has said his country is prepared to spend about $20 billion to purchase some 400 aircraft over the coming decade.
Boeing’s Mideast communications head, Fakher Daghestani, said the company is reviewing the deal, “but until the U.S. government gives us further direction, it would be premature to comment.”
GE, which also has U.S. licenses to sell some medical equipment in Iran, said it looks forward “to reviewing the details of the agreement and will watch the regulatory landscape that may unfold.”
Europeans woo Iran
While the Americans voice caution, Europeans are wasting little time wooing Iran.
Although planned some time ago, Germany’s three-day trip, led by Economy Minister Sigmar Gabriel, comes less than a week after the nuclear accord was reached.
Spanish Industry Minister José Manuel Soria said he will be joined on a September trip by Spain’s foreign and development ministers, and he expects good prospects for Spanish companies in industry, energy, telecommunications, tourism and infrastructure.
French Foreign Minister Laurent Fabius said Wednesday he would be paying a visit to Iran as France looks to explore business opportunities, though he made a point of saying commercial interests were not what drove the deal. A large French business delegation, anticipating a resolution to the nuclear issue, traveled to Tehran last year, rankling U.S. officials.
Airlines across the Persian Gulf from Iran are ramping up operations as interest grows. Discount carrier FlyDubai launched a major expansion to Iranian destinations from its base in the Mideast’s busiest airport of Dubai, announcing five new Iranian destinations on top of two it already serves.
Dubai’s Emirates, the region’s biggest carrier, this month announced flights to Iran’s second-largest city, Mashhad. It already flies to Tehran.
In some ways, loosening sanctions will mark a return to the way things used to be.
French automaker PSA Peugeot Citron has an early advantage in Iran thanks to its strong market position in the country – a legacy of its former partnership with domestic automaker Iran Khodro, which assembled Peugeot-branded vehicles from kits.
Other European automakers have good brand recognition in Iran too, as many only officially cut their ties to Iran under pressure earlier this decade.
Sergio Marchionne, the chief executive of Fiat Chrysler, said this week that the Iranian market “will be an opportunity for all of us” if it opens up.
Ford is taking a more cautious tone, saying it complies with U.S. sanctions and will monitor changes that come out of the agreement.
In the meantime, its Chinese partner, Changan, has signed a partnership with Iran’s Saipa Automotive Group to jointly develop new vehicles.
Other Asian companies have been making inroads too. In May, Brilliance Auto Group became the latest of several Chinese automakers to begin production in Iran, opening an assembly plant west of Tehran with a local partner, Pars Khodro, to make sedans and hatchbacks.
South Korean companies have been building market share in Iran, too. South Korea’s finance ministry said this week that expanding economic cooperation with Iran would be an opportunity for the country, which is a buyer of Iranian crude oil and exported $4.2-billion-worth of goods to Iran last year.
Many ordinary Iranians say they welcome the prospect of new foreign investment. Clothing shop owner Nasser Rahmani says he struggles to convince his customers to part with their cash, and that foreign companies “will give them more options and assure them the situation is running smoothly.”
For Masoud Ismaeili, 54, who runs a glass-cutting shop, it is about finding work for his three unemployed sons.
“God willing, the presence of foreign companies will make the situation better so my sons will find good opportunities,” he said.