Economy, Business And Markets

European Businessmen Heading to Iran Amid US Wrangling

European Businessmen Heading to Iran Amid US WranglingEuropean Businessmen Heading to Iran Amid US Wrangling

The ink was barely dry on a landmark agreement with Iran before a German government plane packed with the nation’s economic elite touched down in Tehran.

They were the first in a rush of European ministers and businesspeople flocking to a market that is poised to reopen after years of grinding sanctions. Upscale Tehran hotels are packed and tables at trendy restaurants are scarce as foreigners jostle for bargains, even amid uncertainty over whether US President Barack Obama can overcome congressional opposition to the deal, wrote the Washington Post.

The steady stream of visitors to Tehran is the latest sign of the Atlantic-wide divide between the United States and Europe, where there is scant opposition to the nuclear deal. Obama and Secretary of State John F. Kerry have warned detractors that they would be unable to reimpose a multinational trade embargo if congress rejected the plans. The five other countries that helped broker the deal have also told congress that they will not return to the negotiating table. The high-level trips show that US leaders can’t even keep Europeans from booking tickets to Tehran ahead of the congressional vote, which needs to take place by Sept. 17.

Germany’s industrial conglomerate Siemens sent a top official to Tehran with German Vice Chancellor Sigmar Gabriel last month. Their government plane touched down at Imam Khomeini International Airport five days after world powers agreed on the nuclear deal on July 14.

 “The agreement reached between the E3+3 and Iran in Vienna has laid the foundations for a normalization of economic relations with Iran,” Gabriel said, using another term for the group of six world powers that negotiated the deal. The vice chancellor was accompanied by a delegation of top officials from some of Germany’s largest companies, including Daimler, Volkswagen and ThyssenKrupp.

Since Gabriel’s visit, high-ranking ministers from France and Italy also have visited Tehran. British Foreign Secretary Philip Hammond plans to rush there Saturday to reopen his nation’s embassy, amid concerns that British business is falling behind its continental counterparts. Spain, Sweden and Poland plan to follow in the fall. Most of the lawmakers have brought top business leaders with them.

Next month, Austrian President Heinz Fischer plans to be the first European head of state to visit Tehran since 2004. Vienna also hosted a major EU-Iran trade conference just a week after the deal was signed.

 “A lot of companies at the moment are preparing agreements to be signed the moment sanctions are lifted,” said Michael Tockuss, the head of the German-Iranian Chamber of Commerce. He said his association is organizing a trip every week for companies interested in doing deals in Iran. Requests for advice have tripled since the accord was announced.

Some initial agreements are already being signed—with government stamps of approval. Italian bank Mediobanca signed a memorandum of understanding in Tehran this month to finance deals between Italian and Iranian businesses. The loans would be guaranteed by Italy’s state-run export credit company, which has estimated that removing sanctions could increase Italian exports to Iran by $3.3 billion by the end of 2018.

Many analysts say European policymakers would have little patience for a US rejection of the agreement. Europe never sundered ties with Iran as completely as the United States did.

 “There is no particular reason why the Europeans would let themselves be affected by US self-inflicted injuries,” said François Heisbourg, a defense analyst at the Paris-based Foundation for Strategic Research.

European firms have been salivating over the prospect of a deal, with leaders preparing to sign contracts as soon as it is legal for them to do so.

 “Iran is an El Dorado for oil,” said Paolo Scaroni, who, when he headed the Italian energy giant Eni, met with Iranian Oil Minister Bijan Namdar Zanganeh about potential investments. At the time of the December 2013 meeting, Scaroni said, “there was already a kind of smell that sanctions might be reduced or eliminated.”

But as the rush picks up between Europe and Tehran, the US-Iran contacts have been far quieter.

In the short term, most American businesses stand to gain far less than their European counterparts. The accord, nevertheless, opens the door for some US companies to expand their business with the Islamic Republic and lays the groundwork for more trade and investment in future years.

A separate clause in the agreement allows for the sale of commercial aircraft and parts to Iran, which wants to buy at least 400 new planes over the next decade from both Boeing and Airbus.

Given the size of the Iranian market, said Richard Nephew, the lead US sanctions expert negotiating with Iran until early this year, it is surprising that more US companies have not been openly advocating for the deal as congress prepares to vote on it.

 “But three, four or five years from now, I can see them going to congress and saying, ‘The Europeans are making a mint while we’re off in the side lot,’ and asking for a change,” Nephew said.

Current sanctions allow limited trade with Iran in areas such as drugs, food and medical equipment. In practice, however, a lot of companies don’t take full advantage because the sanctions leave only a limited number of firms to facilitate the trade.

 “I can under the law send an MRI machine, with a permit,” said Farhad Alavi, a sanctions lawyer with the Akrivis Law Group in Washington. “But it’s hard to find a company to ship it. It’s hard to get paid. With the US removal of penalties, third-country companies might come into the fray.”

Alavi said most of the companies that have contacted him since the deal was announced are taking a long view of investment prospects, but he said they may find that the Europeans are already entrenched in the market.

“Iran is on everybody’s radar,” he said.