DUBAI, United Arab Emirates—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.
Germany is dispatching a large trade delegation to Tehran on Sunday, July 19. 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 American companies from doing business with Iran.
That means they stand to lose out to European and Asian companies—some that still have 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.
Promise of Growth
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 Ltd. 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 Ltd. 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.
The elite Revolutionary Guard is deeply involved in the economy and corruption is such a problem that President Hassan Rouhani lamented late last year that once-secret bribes are now being handed out openly. Iran ranks only 130 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 live up to its end 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 Inc. 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 Co. and engine-maker General Electric Co. 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, and 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.”