France Spearheads European Comeback to Iranian Markets

After days of cold snaps, it was a sunny Wednesday morning at Neauphle-le-Chateau Street in downtown Tehran. The press had gathered at the French Embassy for a briefing on the country’s plans for expanding its presence in Iran.

The fine weather and the morning calm were the perfect metaphor for the French’s positive outlook.  

The importance of Iranian market for France was underscored by Muriel Penicaud, the CEO of Business France, who elaborated on French operations in Iran. Optimism, determination and patience were the main themes.

Founded in January 2015, Business France is a public-private body contributing to meeting three economic targets: helping French businesses expand abroad; aiding employment and development by attracting foreign investors to France; and promoting France’s business image across the world.

“Before anything, we intend to get our trade ties back to pre-sanctions levels,” said Penicaud, who is also France’s Ambassador for International Investment.

“We did not wait for sanctions to completely go away before getting back to Iran. Therefore, we established Business France’s Tehran office in September 2015 to operate as France’s trading arm here.”

Paris opened the first major European trade office in Tehran during the visit of a French delegation led by the Minister of State for Foreign Trade, Tourism and French Nationals Overseas Matthias Fekl and Minister of Agriculture, Food and Forestry and Government Spokesperson Stephane Le Foll.

The Business France office, located at the country’s diplomatic mission in Tehran, seeks to facilitate commercial relations between the two countries.

  300 French Businesses Guided to Iran

Penicaud noted that since January 2016, Business France has held talks with more than 2,000 French firms regarding the Iranian market and helped 300 businesses enter the country.

They are mostly small- and medium-sized enterprises operating in the sectors of mining, agriculture, automotive, aviation, plastic industry and industrial machinery.

“What the embassy reports say and what I have seen personally indicate that France’s business image is quite positive here, as Iranians have used French expertise in auto and aviation sectors as well as health products,” she said.

According to Penicaud, France is currently Iran’s third biggest EU trade partner with bilateral trade amounting to €2.1 billion in 2016, indicating a 235% upsurge compared to 2015.

Iran’s oil exports accounted for the bulk of the figure, with the rest pertaining to French exports to Iran, including auto and plane parts, perfume, cosmetics, chemicals and health products.

  Biggest European Investor in Iran

The French official noted that France ranks first in terms of investments made in Iran compared to other EU countries.

The latest data indicate that French businesses invested €340 million in Iran in 2015, which is yet to reach its all-time high of €1.4 billion in 2002.

Penicaud said it takes about two years for any French company to cement a foothold in Iran, emphasizing that the process of boosting trade to pre-sanctions levels will be lengthy.

“For us, success [in Iran] is made up of three objectives: first is obviously meeting the market demand, second is entering Iran with a win-win mindset, to which end cooperating with local partners is the best way. The third is sealing long-term deals. Reaching these objectives requires patience and determination,” she said.

The Business France CEO also elaborated on the possibilities of boosting Iranian exports to the European Union.

“France, as one of the most attractive countries in the EU in terms of R&D, investment and market access, can be the platform for Iran to enter Europe and Africa and access 500 million consumers,” she said, adding that there are 20,000 foreign companies working in France, but only 20 of them are Iranian.

  Optimism Despite Impediments

Sanctions imposed on Iran over its nuclear energy program were lifted last year, but not all of them. However, most limitations on banking transactions remain in place.

And with a new administration at the White House, the future of Iran’s economic ties with the world is shrouded in uncertainty. The French, however, appeared quite optimistic and believed that France and the EU will strive to bolster ties with Iran.

“We cannot say that the door is open in the post-sanction era, but it is at least half-open. And right now, the number of banks our companies can work with regarding Iran has increased significantly,” she said.

Penicaud noted that the number of EU banks currently working with Iran is 40 and that two of them are French. They are mostly regional banks that abide by EU regulations and are not affected by the United States’ policies. In fact, it is “these channels that have enabled France to have transactions with Iran” so far.

“Obviously, the normalization of banking ties takes time, as it requires lengthy and complex negotiations. We can only hope that the issues will be resolved. But in the short run, the French government is doing its best so that big banks can return to Iran,” she said.

Asked if the French business community is concerned about Iran’s upcoming presidential elections, Penicaud said they are not concerned, rather “they are waiting”.

The French official added that Iranian consumers demand high quality and innovative foreign products, and as such, only the best of the French SMEs can enter Iran.

But the SMEs have concerns of their own, too. The main issue, other than finding the proper partner and getting to know the ropes, is tariffs. According to Penicaud, lack of transparency regarding tariffs and trade regulations makes things complicated and impedes the entry process.

“We usually have three pieces of advice for French SMEs before entering Iran,” she said. “First, things do not work in short term here. Second, any company will need expert market analysts with them to understand the market. Third is to find reliable connections, by for example reaching out to chambers of commerce.”