With sanctions now lifted, many companies may be thinking about doing business in Iran. If you’re one of them, make sure you prepare properly and start early.
That’s the advice from Cambridge-based smart metering and lighting pioneer Cyan, which last month became one of the first British companies to strike a deal in the country, reads an article recently published in the British newspaper Business Weekly.
Executive chairman, John Cronin, said: “The more preparation you do the better and, as with any growing market, responsiveness and agility are high priorities. Working with local partners and businesses—and doing your homework to ensure you are working with the right ones–-it is crucial for navigating the local customs and market challenges.
“Once you have these relationships in place, make sure you have allowed sufficient time for visa applications and the like if you need to travel out to the country to support them in meetings. This may sound obvious, but it is amazing how long these things can take.”
The company won a contract from Iranian telecoms contractor Micromodje for a 2,000-unit smart metering implementation, which will be fitted into street traffic cameras.
Cronin added that as a fast-growing and transitional economy, Iran has rapidly increasing demands for power and over 70% of its population live in urban areas.
“At present, it is estimated that 18.5% of the electricity generated in Iran is lost through inefficient infrastructure, tampering and theft. Due to historic economic sanctions, much of the country’s existing technology is in need of updating, which we saw as a significant market opportunity,” he said.
There were a number of obstacles relating specifically to doing business in Iran that Cyan was required to overcome as a result of many years of economic sanctions.
Cronin says: “There are still a number of Iranian companies and individuals who remain on both the European Union and Office of Foreign Assets Control of the US Treasury Department’s sanctioned lists. We had to ensure that none of the parties involved in the transaction were included on these lists.”
Cyan engaged over a period of weeks with specialist lawyers in both the UK and the US to check all of these requirements would be met. It was also required to check if an export license would be required to export its products from both the UK and the United States, since there is an element of its product that originates in the US.
Cronin adds: “UKTI was very helpful in assisting us and confirming that no license would be required if we ship our products from our subsidiary in India. UKTI also assisted us by helping the UK export controls department to better understand these requirements.”
Cyan has also been faced with challenges in applying for visas and getting its employees onto the ground in Iran. Neither UK nor Indian nationals can apply for e-visas or visas on arrival and therefore need to follow a lengthy process of applying via an invitation from an Iranian company for their visas.
The executive chairman said: “In addition to this, the Iranian Embassy in London is not yet open for consular services so UK citizens are required to travel to an Iranian Embassy in another country such as Ireland, Sweden or Germany to collect their visas once a code has been generated.”
Another issue Cyan has faced relates to the UK banks’ position on accepting payments from Iran.
“There are currently no mainstream UK banks that will accept payments either directly from banks in Iran, or via an intermediary bank,” says John.
Cyan has once again managed to circumvent this issue by trading via its Indian subsidiary, although there are even banks in India who are wary of accepting payments from Iran, particularly if these banks have links to the US. Cyan is also prevented from quoting prices or making payments in US dollars, or having any reference to US dollars in any of its transactions.
“We were very grateful for the assistance of the UKTI in confirming that we could proceed with our export via our Indian subsidiary as this enabled us to exceed our customer’s expectations by deploying the proof of concept in only two days and receive an initial order for £67,000 for a 2,000-unit smart metering implementation for street traffic cameras,” he said.
Cyan worked with UKTI international trade adviser Keith Adams who says: “It’s not easy, especially as no British bank can accept funds from Iran yet and the government is only just starting to populate the embassy.
“However, it worked for Cyan because they were already doing business in India so were able to ship the goods from there.”
While companies wanting to do business in Iran will have to jump through some hoops, things are improving, says UKTI strategic accounts team manager, Simon Crosland.
“Some large UK banks were heavily fined for completing transactions with Iran during the nuclear sanction’s period. This has made them cautious about dealing with Iran despite the relaxation of sanctions,” Crosland said.
“They are also very much exposed to the US systems and there are still several edicts in place relating to Iran ... In addition, Iranian banks are behind when it comes to new technologies and regulations of the financial sectors.
However, Crosland believes the UK government strongly supports trade with Iran.
“The process of reestablishing financial relations with Iran will take some time, certainly several months, but it does seem extremely likely that they will be restored,” he said.
“In the meantime, I would suggest to any UK company with significant opportunities in Iran that it needs to plan the banking transaction channels at an early stage. This will almost certainly require a bank which is willing to receive funds from Iran and is not vulnerable to US legal penalties.”
