Domestic Economy

How Fares Iran-US Trade Ties?

How Fares Iran-US Trade Ties?How Fares Iran-US Trade Ties?

Encouraged by the prospect of a final nuclear deal between Iran and the P5+1 (the five permanent members of US Security Council plus Germany), business communities in Iran and the United States have over the past months been calling for normalization of bilateral trade relations.

Business owners from both sides have so far made a number of visits back and forth find potential business partners, but to little avail so far.

The US was among Iran’s largest trading partners before the 1979 Islamic Revolution. According to an article by web-based news outlet, Quartz, American goods—mainly arms, industrial equipment, technology, and agricultural and consumer goods—accounted for some 16% of Iranian imports. Iran bought between 50% and 75% of its imported rice, wheat, and cereals from the United States in the 1970s.

Diplomatic relations between Iran and the US were severed following the revolution which led to the overthrow of former Shah of Iran. Ever since, bilateral relations have undergone various vicissitudes.

However, the election of President Hassan Rouhani in June 2013 marked a dramatic shift of tone. Initiated by a direct phone call between President Rouhani and his American counterpart Barack Obama, the two countries started to hold frequent face-to-face meetings in a bid to find a solution to a decade-long standoff over Iran’s nuclear energy program.

The first attempt to revive bilateral business relations came as a proposal to establish a Joint Chamber of Commerce. The attempt, however, failed to succeed as it was concluded that it was impossible to form such a body in the absence of active diplomatic relations between the two countries.

  American Agriculturists

In February 2014, a group of American agriculturists attended the first International Poultry and Livestock Exhibition on Kish Island and signed an agreement to sell barely, corn and sesame to Iran at 20% below market price. However, they failed to live up to their promises for no other reason but political constrains.

Head of the Central Union of Iran Animal Farmers, Saeed Soltani, said the Americans were deterred by unfavorable political atmosphere between the two countries.

  Contracts With Boeing

Until the autumn of 2014, sanctions had prevented US companies from selling aerospace parts to Iranian airlines. Iran Air’s fleet includes 12 Boeing aircraft, some of which are more than 30 years old. Boeing’s small sale of aircraft manuals, drawings and navigation charts to Iran Air in October 2014 carried symbolic weight as the first publicly acknowledged transaction between US and Iranian aerospace companies since 1979.

Iran has reportedly signed three contracts with Boeing since an interim nuclear deal was negotiated in late 2013. Two were extensions of existing agreements and one was a new contract between Iran Air and the American company. So far, Boeing has repaired seven of Iran Air’s plane engines, according to Iran Air CEO Farhad Parvaresh.

  Auto Sector

Just a week after a landmark framework nuclear agreement was reached between Iran and the P5+1 in the Swiss city of Lausanne on April 2, secretary-general of the Iranian Auto Parts Manufacturers Association, Sasan Qorbani, announced that some American carmakers have expressed eagerness to invest in Iran’s auto market provided that Iran reaches a comprehensive nuclear deal with the world powers.

Iran is one of the largest car markets in the Middle East. American cars were popular before the revolution. General Motors partnered with an Iranian company to produce cars for several years before 1979. The auto industry has historically been Iran’s largest non-oil industry. Domestic production peaked in 2011, at about 1.6 million vehicles per year, before tightened sanctions cut off imports of car parts and bank transfers which halved output. But auto sales rose 32% in 2014 over 2013.

  Unofficial Visits

Reports emerged in the media in mid-April that an American delegation comprised of 22 entrepreneurs, investors and consultants traveled to Iran to explore avenues for investments following the removal of anti-Iran sanctions.

According to the media outlets, senior US business delegations  from aviation companies to oil groups and food conglomerates are said to have been discreetly traveling to Iran or holding meetings with Iranian businessmen over the past year in preparation for the day when restrictions on doing business with one of the world’s biggest untapped markets is removed.

The Iranian media reported last Sunday that a group of 15 Iranian traders and entrepreneurs embarked on a three-week unofficial visit to the US in a bid to introduce Iran’s commercial capabilities to the American business community.

“The trip serves no political purpose. That is why the Iranian delegation has only visited scientific and academic centers in the US,” former member of Iran’s chamber of commerce, mine, industry and agriculture, Hamid Hosseini,  was quoted by Mehr news agency as saying, noting that the visit by the Iranian delegation comes at the invitation of US-based NGO, the Learning Institute.

The delegation intends to present the real image of Iran which has been distorted by the western media in recent decades, Hosseini said, adding: “The US businesses want to develop trade ties with Iran, but a web of sanctions imposed by the US on Iran’s economy has been keeping them at bay.”

Although much needs to be done for Iran to pave the way for foreign players in general to invest in the country after the removal of sanctions, many believe the Iranian market is endowed with unique characteristics to attract investors.

“US producers may face obstacles to selling and investing, but the Iranian market is too large to ignore, especially given the dearth of other emerging markets with a middle class eager and able to buy imported goods,” wrote Garrett Nada for Quartz.