Economy, Domestic Economy

Scotland Sets Sights on Trade With Iran

Scotland Sets Sights  on Trade With IranScotland Sets Sights  on Trade With Iran

The prospect of oil giant Iran opening up for business in the coming months might not seem like good news for Scotland’s oil capital, Aberdeen, but that’s not how the Scottish National Party’s Alex Salmond sees things.

“This is not just a good opportunity,” the SNP foreign affairs spokesman and Scotland’s former first minister told an audience at a BBC debate on the fringe of the SNP conference in Aberdeen.

“It’s an unambiguously a great one. Scotland has much to offer. Benefits can flow both directions.”

Salmond is currently a member of both the Scottish and United Kingdom parliaments.

Iran struck a deal in July over its nuclear program. Under the terms of the agreement, Iran will be granted sanctions relief in exchange for the country limiting its nuclear program. It is expected that this will happen sometime early next year.

Within months, Iran will be producing about 500,000 barrels of oil a day, and billions of dollars of Iranian government funds, currently frozen in overseas bank accounts, will be freed up to spend in key sectors such as petrochemicals, oil and gas, mining and construction.

 Technology Transfer

The economies of Scotland and Iran both rely on crude oil and Scottish engineers were heavily involved in prospecting for oil in Iran and developing the oil industry there in the early 20th century.

However, future ties between the two countries may go beyond oil.

Salmond said he was taking a delegation of Scottish business leaders to Tehran shortly to promote cooperation in agricultural technology among other areas.

Scottish companies are also looking for openings in the fields of education and digital technology.

A generation of Iranian gamers grew up on Grand Theft Auto, the computer game developed by Edinburgh-based Rockstar North.

According to Salmond, Scottish expertise in digitally mapping archeological sites could be of interest to Iran, as the latter was a cradle of civilization and holds a rich depository of historical sites.

Also taking part in the BBC event were a number of UK business people, with long experience of working in Iran. All agreed that exporting knowhow would be a key component of future business ties with Iranian companies.

Paddy Collins is the chief executive of Aubin Group, based near Aberdeen, which supplies chemicals to the oil and gas industry.

“Iranians know what’s going on and what technology they want and need,” he said. “You’ve got a huge workforce of highly educated people who can easily be trained up.”

“The key thing is transfer of technology; Iranians want that with every major project,” said Nigel Coulthard, another Iran veteran, who is president of Franco-Iranian economic exchange group Cercle Iran Economie.

But underneath the optimism is a deep concern in Aberdeen about what lifting Iranian oil sanctions will mean for oil prices.

Iran says it could add 1 million barrels a day to its production a year after sanction are removed. This will add to a global market already oversupplied by 3 million barrels.

Some analysts say this could put more downward pressure on oil prices that are hovering around $50 a barrel for Brent crude. Last year, the price was $90.

That’s not good news for Scotland’s oil industry, which already has some of the highest production costs in the world at about $40 per barrel, compared with just $5 in Iran.

But Iran also says it wants to invest some $185 billion in developing its oil and gas resources over the next decade, most of which will have to come from international oil giants.

Salmond said: “The oil industry here is an international one. The ability of Scottish-based companies depends on international prospects.”

Senior executives from Scottish-based oil services firm Amec Foster Wheeler, and industrial giant Weir Group, accompanied Foreign Secretary Philip Hammond on his August visit to Tehran.

If Scottish companies do succeed in capturing new markets in Iran, they will be doing so from very modest beginnings.

Compared with the rest of Europe, the UK’s trade turnover with Iran has always been relatively low, even before sanctions.

Iranian customs statistics show Scotland exported $4.7 million worth of goods and services to Iran in the year to March 2015, and its imports were almost zero.

Iran’s imports globally were $52 billion, including some $600 million from England. In other words, Iran’s trade with the UK is small and negligible with Scotland.

“Iran is a country of 80 million people. It has a young population and it is a consumer country,” said Maryam Kiaie, business development director of Rah-Shahr International, an Iranian construction group.

“Iran’s opening up is brilliant news for everyone.”