What If You Export to Iran After US Sanctions Snapback

After announcing the walkout from the nuclear deal with Iran and the reestablishment of economic sanctions by US President Donald Trump, many Spanish businessmen with a presence in Tehran are wondering what will happen to their businesses. 

“This news was known since Trump began his electoral campaign,” says Ignacio Bartolome, co-founder of How 2 Go, a firm specialized in helping SMEs expand abroad. 

“The breaking of the agreement is very bad news, and the Spanish companies that were interested in approaching that market will surely stop doing it,” says Alfredo Bonet, international director of Spanish Chamber of Commerce, reads an article recently published by the Spanish daily El Pais. Below is the translation of excerpts:

On July 14, 2015, the EU’s top foreign policy representative, Federica Mogherini, announced the deal with Iran. Economic sanctions were lifted and many companies saw a clear business opportunity. 

“Iran went back to exporting oil in larger volumes, which provided greater rents that could be used to pay imports or invest,” explains Bonet. 

The consulting firm How 2 Go jumped on that bandwagon and since May 2015, when it opened its office in Tehran, it has helped establish more than 100 medium-sized Spanish, Moroccan and British companies. And the road has also been reversed: Some 30 Iranian companies started operating in Spain with the help of this intermediary.

Trade balance between the two countries has always been unfavorable for Spain, since the importation of Iranian oil has always been much greater than the exports of Spanish products. 

In 2016, after the nuclear deal between Washington and Tehran, Spanish exports to the Iranian country grew by 54%, reaching €360 million, according to the ICEX.

“Knowing the full list of companies operating in Iran is complicated, because many fear reprisals from the US,” explains Enrique Juarez, co-founder of How 2 Go. 

The consultant explains that the large companies that operate in Iran often do so through subsidiaries. El Pais tried to contact several companies that work in Iran, which refused to make public statements for having conflicts of interest, such as having a client in Saudi Arabia.

  Not the Case for SMEs

This is not the case for small- and medium-sized enterprises, according to How 2 Go, because for these companies it is easier to establish in Iran, which is a new market, growing and needing to purchase products. 

“A lot of scaremongering has been created with the reinstatement of sanctions, but there are many European companies with interests in Iran,” says Bartolome. 

Small businesses need not fear reprisals that the United States threatens. For this reason, the consultant believes that Trump’s announcement will not change the Spanish business fabric in Iran. 

In this sense, the position of Spanish Chamber of Commerce is also clear: “Companies that do not have commercial interests in the US should try to continue doing business with Iran. There are many Spanish SMEs that export to Tehran and they should not have any difficulty in continuing to do it.”

  Restoring Commercial Ties

In fact, Spanish institutions have focused on restoring commercial relations with Tehran. Iran’s Chamber of Commerce, Industries, Mines and Agriculture, together with the Economic and Commercial Office of the Embassy of Spain, organized a meeting in Iran between Spanish and Iranian businessmen in October 2016. 

In July 2017, a delegation of more than 20 Spanish manufacturers of equipment and components for the automotive industry traveled to Iran to attend a meeting organized by the Spanish Association of Automotive Equipment and Components Manufacturers (Sernauto), in collaboration with ICEX Spain Export and Investments. 

The delegation was received by representatives of Iran Khodro Company and SAIPA, the two main automobile manufacturers in Iran with a 95% market share in the country. 

And in February this year, Spain’s Foreign Minister Alfonso Dastis made an official visit to Iran where he held a meeting with Spanish businessmen with interests in the country.

Bartolome said since he broke the news of the US walkout from the nuclear deal, he has received numerous calls from his clients established in Tehran. 

“Iran lost the train of technological innovation due to sanctions, and now it does not want to be an economy totally dependent on oil,” says Bonet. 

That is why it points out that the country intends to invest the income obtained from oil in other sectors to diversify the economy.

Iran represents a market with over 80 million inhabitants that need technological products. 

“The Iranians have a good opinion of the Spanish companies and they buy a lot,” explains Juarez. 

The government of Iran is targeting annual growth rates of around 8%, taking advantage of its condition as a bridge between Europe and Asia. 

“We know that the United States, Saudi Arabia and Israel share interests contrary to the opening of Iran, but a small or medium company that exports to this country should not be afraid; it should approach this market because it is an opportunity,” concludes Bartolome. 

And in that sense, they have in principle the support of EU and Spain, which affirm that they will try to maintain the agreement. 

“It is one of the great assets that Rouhani, the president of the Iranian government, has sold to reintegrate Iran into the global economy,” explains Bonet. 

And he adds a tip: “Everything can be seen a little upset, so it is prudent to wait and see how the events unfold in the coming months.”