Economy, Domestic Economy

Foreign Businesses Stream Into Iran as Sanctions May End

Foreign Businesses Stream Into Iran as Sanctions May EndForeign Businesses Stream Into Iran as Sanctions May End

Visiting business delegations are streaming into Iran with an eye on lucrative new deals before a June 30 deadline for a sanctions-lifting nuclear agreement with six world powers.

Tehran saw “an explosion” of foreign business delegations in the weeks after the framework for a nuclear accord was announced in March. “Everyone is now waiting for the end of Round 2 in June,” said Heinz-Joachim Heise, a Switzerland-based management recruiter who opened an office in Tehran last summer.

Multinational corporations, mostly from Europe and Asia, that did business in Iran before western sanctions forced them out have started making plans to return. They include many well-known brands, such as German auto manufacturer Mercedes-Benz, French oil giant Total and US electronics manufacturer Hewlett-Packard, according to news accounts.

Iran represents enormous potential to investors. It boasts an educated population of 81 million, comparable to Germany’s. Its natural gas reserves rank second in the world, and its oil reserves rank fourth. Yet production in the energy sector, mining and manufacturing is far from fully developed.

However, there’s apprehension about the Iranian government’s outsized role in the economy through networks of pension funds and semi-state organizations that own shares in many firms.

The Iranian government “has a huge presence in the market,” said Amir-Ali Amiri, founding partner of the Tehran-based investment firm ACL.

Another problem: Western companies left Iran without delivering spare parts for machinery they sold before tighter sanctions were imposed in 2012, Heise said. “Iranian businesses will demand damage payments for machines that broke because they had no spare parts,” and Iranian courts will probably back such claims, he said.

Andreas Schweitzer, managing partner at Swiss-Iranian investment firm Arjan Capital, has seen a lot of French, Spanish, German and Italian companies sending lawyers and accountants to learn how to remain in compliance with European and American legal requirements once doing business in Iran is permitted.

“The ramp-up period is not trivial,” said Schweitzer, who started out in Iran in 2009 by developing wind farms and helps foreign investors do business there.

*From an article by Oren Dorell for the USA Today