Economy, Domestic Economy

Canberra Poised to Reengage With Iran

Canberra Poised to Reengage With Iran Canberra Poised to Reengage With Iran

Trade with the second-largest country in the Middle East and its population of 78 million people is back on the agenda after the lifting of a range of sanctions.

This is what the Australian Department of Foreign Affairs and Trade wrote in an article published on its website in the runup to Iran’s Foreign Minister Mohammad Javad Zarif’s upcoming visit to Australia later this week.

Excerpts of the article follow:

The removal of sanctions will reduce barriers on exports and imports to Iran and improve Australian businesses’ access to Iranian markets, ensuring that Australian business is not disadvantaged in pursuing opportunities in Iran.

Sectors identified for good early prospects for Australian exporters include agriculture and food; water sustainability and management; education and skills training; and the healthcare and well-being sectors.

In the medium term, there are also likely to be opportunities for Australian companies in mining, oil and gas-related areas.

Twenty years ago, Iran was Australia’s biggest export destination in the Middle East with the export of agriculture products dominating, along with postgraduate education and mining, oil and gas services.

Since 2006, Australia had implemented successive rounds of UN Security Council sanctions against Iran for its nuclear program and since 2008 had also implemented autonomous sanctions.

Foreign Minister Julie Bishop announced in January that Australia was lifting autonomous economic sanctions on Iran, such as those targeting the oil and gas sector, most banks and the transport sector.

Also, many Iranian individuals and entities that were designated under autonomous sanctions have been removed from the Australian Consolidated List, which means that Australian business can undertake business activities with these previously specified individuals and entities.

While market conditions have changed significantly, a growing middle class, including Greater Tehran, with a population of around 15 million and large cities, including Mashhad, Isfahan and Tabriz, are demanding higher quality goods and services.

Despite recent international sanctions, Iran has maintained a large and sophisticated market with its young and well-educated population, a resilient private sector and a diverse economic base. These factors, combined with its strategic geographic location, have Iran poised to reengage with the international business community.

Zarif, who is currently staying in New Zealand, is scheduled to visit Australia on Tuesday and hold talks with his Australian counterpart.

The visits are part of an Asia-Pacific tour, which started the previous Saturday and also took him to Indonesia, Singapore, Brunei and Thailand.

  Increased Opportunity for Aussie Businesses

The lifting of the nuclear sanctions will present increased opportunities for Australian businesses, wrote Australian Ambassador to Iran Paul Foley on the same page.

Despite the tense international situation in recent years, Iran remains a large and sophisticated market with a young and well-educated population, a resilient private sector, a diverse economic base and an important geographic location. It will remain an important player in world hydrocarbon markets.

Australia and Iran have traditionally maintained a solid trade relationship, although bilateral trade, similar to that of most other countries, has fallen in recent years.

There will be strong international competition for business in Iran as is already evident from the interest shown from a range of countries, particularly from Europe.

However, a number of factors may assist Australian businesses in their efforts. These include a longstanding presence by Australia in the market, a familiarity and respect between the business communities of both countries, the strong reputation for the quality of our products and a positive view of Australia and Australians by many in Iran.

In considering whether to pursue opportunities in Iran, there are a number of issues that Australian business will need to factor in.

Businesses that were previously active in Iran will wish to update their market knowledge on what may have changed in the Iranian market and regulatory environment during the period of international sanctions.

They will also need to pay careful attention to the terms and implications of sanctions relief under the JCPOA and how this may affect them. This will need to include an understanding of sectors where sanctions may still apply and the approach of countries, including the United States, which will maintain a range of sanctions against Iran.

In this context, it may take a little time for international banking arrangements to become clear, as international banks work through the implications of the changed sanctions environment.

Australian businesses will want to have an understanding of how banking arrangements may affect their business.

The Iranian economy has been sluggish in recent years and is sensitive to low global oil prices. Some of the associated economic challenges are likely to take some time to work through. However, the Iranian economy has retained and developed a number of substantial capabilities.

As in any market, finding the right local business partner will be important. Building and developing a relationship of trust over time with business partners will remain a key aspect for success. Iran is not a short-term gold rush but a market where rewarding business can be developed and grow over time.

With the number of flights between Australia and the region now running into the hundreds every week, access to Iran from Australia from Middle East airline hubs has never been easier.

With Iran beginning to emerge from the period of international nuclear sanctions, there is considerable potential to take advantage of opportunities in Iran.

Highlight: With the number of flights between Australia and the region now running into the hundreds every week, access to Iran from Australia from Middle East airline hubs has never been easier