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Country hit hard by years of sanctions could see foreign investment flood in if historic Vienna agreement clears hurdles
European firms are racing to secure business opportunities in Iran after the UN security council adopted a landmark nuclear deal, paving the way for sanctions to be lifted later this year.
The 15-member body unanimously voted in favour of the Vienna agreement to lift restrictions on Iran in exchange for Tehran rolling back its nuclear programme. The vote on Monday marked the beginning of the end of the sanctions regime that has taken a heavy toll on the country’s economy.
Germany is leading the pack, sending its vice-chancellor and economy minister, Sigmar Gabriel, along with representatives from some of its top firms including Mercedes-Benz, Siemens and Volkswagen to Tehran for meetings with senior officials.
Gabriel, heading a three-day 100-member delegation, held meetings on Monday with the Iranian oil minister, Bijan Zanganeh, who said the country’s gas production would surpass 1,000m cubic metres per day in the next three years and that its oil production was expected to reach 4.7m barrels per day “in the near future”.
Gabriel provoked controversy in Tehran by calling on Iranian authorities to reconsider their relationship with Israel to improve economic ties with the west. Germany’s current exports to Iran are worth €2.7bn a year and it is looking to double that amount, bringing it to the level it was a decade ago.
Ramin Rabii, chief executive of the Tehran-based Turquoise Partners Group, which facilitates foreign investment in Iran, said the number of Europeans approaching his firm has soared exponentially.
“The amount of interest in Iran has been unbelievable. Before this, in our own company, we received one or two emails every month, but in recent months we are receiving at least 10 to 20 emails per week,” he told the Guardian. “We have hosted more than a 100 foreign investment delegations to Iran over the past 15 months; of those 90% were European, many from Scandinavia, UK, Germany, Italy, but even from the US.”
Rabii said the uncertainty before the deal put everybody “from the average man in the street who wanted to buy a car all the way to sophisticated investment” on standby. But he said the historic agreement reached in the Austrian capital last week will be a huge boost to the Iranian economy, with industries returning to their nominal capacity and consumer confidence increasing.
“This is a geopolitical earthquake,” he said. “The fact that Iran and the US, after three and half decades, were sitting in front of each other, meeting each other face to face and finally coming to a resolution on one of the most difficult international issues, is a huge achievement and will probably shape a new era of cooperation and partnership which can help bring more peace to the region.”
Under sanctions, Iran’s economy suffered negative growthbut since president Hassan Rouhani’s victory in 2013, he has managed to bring down the inflation to 15% from its peak of 45%. The economy is also back in positive growth. Official figures put unemployment at 11%, though economists using a tougher definition of unemployment put it at least twice that figure.
Iran’s economy is still heavily dependent on oil; 15% of it is based on oil, Rabii said, compared to 50% of government income which comes from crude sale. Many big oil firms, such as ENI, Shell and Total, are studying a comeback to Iran’s oil and gas opportunities. Iran’s oil ministry is offering lucrative deals.
With US ties improving, American giants such as Exxon Mobil and Chevron, which were previously absent from Iran, could also weigh in. It has also been reported that Apple and even McDonald’s are looking into franchise-based business operations in the country.
Esfandyar Batmanghelidj, who is organising the second Europe-Iran forum in Geneva in September to bring Iranian business leaders and foreign investors – including France’s Alstom, the UAE’s Aujan, and Italy’s SACE – together, said with sanctions relief, foreign investment will begin to come in within a year.
“Major multinational corporations have already begun planning new or expanded business in Iran, where consumer-focused sectors like FMCG, consumer electronics, luxury, and the hospitality and leisure sectors will pose the best near-term opportunities,” he said.
Amir Ali Handjani, an Iranian-American energy executive with extensive experience in the region, struck a cautious note, saying that it was still unclear if Iran would see tangible sanctions relief before the US Congress weighed in. The US president, Barack Obama, sent the nuclear deal to Congress on Sunday and lawmakers are expected to vote within two months’ time.
“Major international financial institutions or multinational conglomerates … will wait until that deal gets the approval of the US Congress,” Handjani said. “I would expect second- and third-tier firms to be the first movers. They have less bureaucracy to manage and can be more nimble.”
He added: “In the meantime, expect companies that are already doing business in Iran, who have US Treasury [approval] and EU green light in the areas of humanitarian trade such as agriculture and pharmaceuticals, to perhaps increase their exposure to the Iranian market. I would also expect Iran to aggressively pursue the purchase of new aeroplanes from the likes of Boeing and Airbus.”
Handjani also said it was likely that Iran would soon be able to sell crude. “I think that is where we will see the most immediate loosening up of restrictions,” Handjani said. “Iran has between 40m and 50m barrels of crude at sea. Expect this crude to come to the market in short order. They will start competing fiercely to regain market share that they have lost to their Persian Gulf neighbours. Unfortunately for Iran, the timing could not be worse. Oil prices are depressed and already there is a glut of oil on the market. Adding Iran’s crude will put further downward pressure on oil prices.”
http://www.theguardian.com/world/2015/jul/20/western-businesses-eye-iran-after-un-backs-nuclear-deal
