Domestic Economy

Deals of Up to €40b Fruit of Rouhani’s France Visit

Deals of Up to €40b Fruit of Rouhani’s France VisitDeals of Up to €40b Fruit of Rouhani’s France Visit

Iran signed an array of deals worth a total of €30 billion ($33 billion) during President Hassan Rouhani's second leg of his Europe visit to France, according to Bloomberg calculations.

Some media outlets like British newspaper The Independent put the overall figure at a whopping €40 billion.

The deals were signed in a special ceremony attended by President Rouhani and his French counterpart Francois Hollande at the Elysée Palace in Paris.

These include an agreement to buy 118 Airbus aircraft, which is worth $27 billion at list prices alone, as well as a joint venture between France’s PSA Peugeot Citroen and Iranian automaker Iran Khodro.

The France visit by the Iranian president and his accompanying high-ranking delegation of 120-strong delegation of business leaders and ministers came after he secured up to €17 billion ($18.4 billion) worth of deals in Italy.

It all comes against the backdrop of the implementation of the landmark nuclear deal on January 16, which officially marked the end of western sanctions regime and the opening up of Iran's $400 billion economy.

Among other deals announced in the French capital, Aeroports de Paris and Bouygues SA will assist in the construction of a new terminal at Tehran’s main Imam Khomeini International Airport and Vinci SA signed an outline agreement to run and renovate airports at Mashhad and Isfahan.

French container line CMA CGM SA also agreed to cooperate on shipping and terminal development. Suez Environnement Co. will work on water-treatment measures in Tehran, Sanofi signed an accord on health products and Total SA inked a purchase accord for Iranian crude oil.

> Airbus Order

The Airbus accord covers 45 single-aisle planes comprising 21 from the current-generation A320 family and 24 re-engined A320neos, the company said.

The 73 wide-body aircraft ordered include 27 A330s, 18 A330neos, 16 of Airbus’s latest A350s–in the stretched -1000 variant–plus the A380s.

Besides the large aircraft order, the deal also includes a comprehensive cooperation agreement in which Airbus will play a role supporting the modernization of air traffic control services, airport operations and aircraft maintenance, regulatory harmonization and technical and academic training and industrial cooperation, according to Airways News.

“Today’s announcement is the start of reestablishing our civil aviation sector into the envy of the region and along with partners like Airbus we’ll ensure the highest world standards,” said Farhad Parvaresh, Iran Air Chairman and CEO.

Iran's decision to buy the A380 is a significant boost for Airbus.

The company has struggled to convince airlines to order the world's biggest passenger aircraft in the past two years.

Airbus only broke even on the A380 program last year, a decade after it first took to the air.

Iran is also interested in buying planes from Boeing, Airbus's arch rival.

Minister of Roads and Urban Development Abbas Akhoundi has estimated that Iran will need 400 medium- and long-range planes, and 100 short-haul jets, in the next few years.

Years of western sanctions have left Iran's civil air fleet in dire need of an overhaul. Iranian airlines have about 140 planes that are an average of 20 years old, with many needing to be retired.

> Auto Deal

Peugeot on Thursday signed a contract with Iranian firm Iran Khodro to start a joint venture that will make three new models from scratch in the country—a crucial market for a company that is starved of revenue growth as it continues on its rebound, wrote the Wall Street Journal.

"We are coming in hopes of a very long-term relationship,” said Carlos Tavares, chief executive at Peugeot. “We will be present in this country in a very profound manner.”

The two partners are expected to invest up to €400 million ($435 million) over five years and the joint venture is expected to produce up to 200,000 cars a year out of a factory in suburban Tehran. Production is slated to begin in the second half of 2017.

Meanwhile, Renault remains in discussions to buy local Iranian car maker Pars Khodro, but failed to get a deal done in time to sign a contract at the ceremony.

Peugeot’s deal marks its return to Iran after a four-year absence.

Iran Khodro, which is 14% owned by the Iranian government, was Peugeot’s former partner before the French company’s decision to shut down its operations in 2012 in the wake of anti-Iran sanctions.

Before 2012, Peugeot would send parts, which then were assembled in Iranian plants.

The new joint venture includes a technology transfer and will build cars from scratch in the country. Peugeot said it will also incorporate the vehicles made in Iran and that they will be at least 40% comprised of locally sourced parts.

Before sanctions, Iran was Peugeot’s second-biggest market after France, with a sales volume of around 400,000 cars a year.

“Peugeot would have liked to not have left,” said Tavares. “We too were victims of international sanctions.”

> New Chapter

While in France, President Rouhani delivered a major speech at Medef, France’s main pro-business confederation in the presence of French Prime Minister Manuel Valls and top French CEOs.

“France has announced that it is ready to once again enter Iran with a new energy and a new will. We have also come here today to welcome French entrepreneurs, investors to begin economic activities in Iran,” the president told the business leaders.

Valls replied that Iran could count on France, the Guardian reported.

“We can open a new chapter,” he said at Medef. “France is ready to mobilize its business sector … for modernization of your country. I want to put it in a few simple but strong words: Iran can count on France.”

Addressing the same event, Iran's Minister of Industries, Mining and Trade Mohammad Reza Nematzadeh urged French banks to overcome their wariness about doing business with the country, adding that there were no longer obstacles to keep French banks from doing business with Iran.

Nematzadeh said international banks only needed to respect three conditions to avoid falling foul of US sanctions: not do work through a US branch, avoid doing business with persons and entities on the sanction list and not clear transactions via the United States.

"These three conditions are very clear. Please take this seriously; from our side, things have started," he was quoted by Reuters as saying.

Also on the stage at Medef was Mohsen Jalalpour, the head of Iran’s Chamber of Commerce, Industries, Mines and Agriculture. He said the Rouhani’s administration has prioritized the private sector.

“For over eight decades, Iran has been heavily dependent on oil and the government has played a big role in the economy but this administration is pursuing a new approach.”