With time and consequences, the economic landscape in Iran has changed, some would say almost completely. Thanks to the international agreement to close the nuclear dossier once and for all, the months ahead will demonstrate in clear terms that Iran too is one of the good places to do business and make a decent profit.
Now it’s not if but when to reconnect with Tehran and gain its market share. Business and political leaders from across continents coming to and going from Iran now have one thing in mind: When to put the new contracts on paper and get going. It is obvious that the task ahead is monumental given the red tape and torpor, not to mention the complexities that normally come with starting anything new in the country.
But Iran has something few, if any, countries can rival: rebuilding entire infrastructures starting from the key oil/gas sector to constructing new towns and cities to meet the demands of 80 million people. And almost all of the previously constitutionally-mandated off-limit strategic sectors are now open to foreign investment and partnership.
Countries willing to invest in Iran apparently fall into two categories: those exhibiting more risk for higher return and others that tend to play safe, take less risk and wait for stability.
While companies are rebuilding bridges with potential partners, there are reports on foreign investments already taking place. In online business, companies with high advertisement budgets wanting to promote their brands and grab a bigger share of the pie during the ongoing recession seem to have foreign shareholders. Similarly, a logo of the French automaker Renault on a deluxe apartment in west Tehran catches the eye, which further indicates the company participation in Iran. Renault has recently announced it will make a direct investment of up to €500 million in Iran.
Apart from the fear of hefty fines for disregarding the sanctions, some countries have political concerns about losing their markets in neighboring countries with not cordial ties to Tehran. However, given the global recession and the systematic decline in commodity prices that are pulling down economies of various sizes, these states cannot afford to be left behind in the race to secure a share of the Iran market.
Hence, while some countries wait for a green light from the International Atomic Energy Agency (IAEA) that should pave the way for ‘business as usual’ with Iran, others have made known their willingness to finance companies willing to cooperate with Tehran.
Looking at the degree of risk aversion across developed countries estimated by the US Federal Reserve, France has the third highest degree of risk aversion, which cannot explain its long-lasting presence in Iran’s Auto industry. Renault, for example, never completely got out in spite of the tough international restrictions on doing business with and in Iran.
On the other hand, South Korea has the lowest degree of risk aversion that also maintained economic relations during sanctions and now is willing to invest in projects offered by the Iranian government after the sanctions regime becomes a thing of the past.
If the measure of risk aversion has essence in relative terms in determining countries tentative presence or return to Iran, we shall see the Koreans at the forefront to be followed by Poland, Japan, Germany, UK, Austria and France.
