Thursday, August 28, 2014


Iran

As Sanctions Are Relaxed, Western Businesses Look To Iran

Robots work on a production line of carmaker Iran Khodro, the country's leading automobile manufacturer. (file photo)
Robots work on a production line of carmaker Iran Khodro, the country's leading automobile manufacturer. (file photo)
By Charles Recknagel
The easing of sanctions on Tehran that has just taken effect is sending Western companies rushing to seek new business opportunities in Iran.

A group of senior French executives, including from the energy and automotive sectors, is heading to Tehran early next month. They follow a delegation of British lawmakers who visited this month.

At the same time, Iran's Trade Promotion Organization says business delegations from Italy, Austria, Georgia, Kazakhstan, Turkey, and many other countries have already visited since late last year, when an interim nuclear deal between six world powers and Iran was announced.

Under the sanctions that were relaxed under the deal, Iran will be allowed to spend some $4.2 billion in previously frozen funds over the next six months. However, the largest part of the international sanctions regime remains in place pending a permanent future solution to the Iranian nuclear crisis.

Back In Action

Still, even a partial easing of sanctions is enough to create huge business interest on both sides. Iran needs Western goods and technology to modernize its economy, and Western companies want to provide them.

"Iran for the better part of 20 years has been deprived of free access to the latest Western technology, which is the leading technology in many areas," Iranian-born economist Mehrdad Emadi of the U.K.-based Betamatrix International Consultancy says. "And in the last five or six years, this restriction has become much more robust and there has been a real shortage of know-how in certain sectors of the Iranian economy."

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Emadi says Iran's oil and gas industry, which has long been subject to U.S. sanctions on new technology and investment, is particularly hard hit. He notes that production levels in many fields is today one-quarter of that of similar fields in neighboring Qatar or Iraq.

More recently, the imposition of ever more sanctions has weakened still more sectors, including Iran's once highly successful automotive industry. The sector produced 1.5 million new vehicles in 2011 but production is down to just a little over half that -- 800,000 cars -- today.

"The automotive industry in Iran, until about 2 1/2 years ago, had a share of close to 10 percent, 9.8 percent, of the GDP, employing more than 950,000 people, the largest employer in the country outside government," Emadi says. "And this sector has really been close to collapse because they haven't been able to import the latest capital equipment."

Equally, Iran's aviation sector is in dire straits after being cut off from new Western airplanes and parts since 1979. Iran's national carrier has kept its aging fleet flying by using homemade spare parts and buying vintage Russian planes from Kazakhstan and Uzbekistan, but its safety record has plunged accordingly

BACKGROUNDER: Key Points Of Iran Nuclear Deal


There is also an urgent need for Western medicines and hospital equipment, plus market demand for imported foods and consumer goods.

'Certain Things'

For now, just what specific goods and services Western companies can provide to Iran in various sectors remains opaque. Western companies interested in returning to the Iranian market are seeking clarifications from their governments which, until now, have avoided going into details due to hot political debates in many of their own countries over the wisdom of the interim nuclear deal.

Mark Fitzpatrick, director of the Nonproliferation and Disarmament Program at the International Institute for Strategic Studies (IISS) in London, says such opposition could yet undermine the interim accord, making commercial deals with Iran a potentially risky business.

"I think that the interim deal will hold. Both sides have strong incentives to adhere to this interim deal," Fitzpatrick says. "It could be undermined, however, by political pressures in various capitals, particularly in Washington and Tehran, if, in Washington, for example, senators who are promoting a new sanctions bill are able to pass it over [U.S.] President [Barack] Obama's opposition. It could create a very negative dynamic that could persuade Iranian parliamentarians to impose some measures on their own, which they are already talking about."

But for now, it is talk of business deals with Iran that dominates the stage.

Iranian President Hassan Rohani is expected to court global business next week at the World Economic Forum in Davos, an annual meeting in Switzerland of political and economic leaders and thinkers.

Meanwhile, Washington has cautioned that businesses should tread very carefully. U.S. Treasury Under Secretary David Cohen said on a visit to Europe last week that "Iran is not open to business." He added, "There are certain openings but they are limited."

Much At Stake

Still, there is little doubt that Western officials, as well as many officials in Tehran, want renewed commercial contacts to take place and succeed.

Political analysts say it is in both sides' interest to create an early "feel-good" factor from the easing of sanctions if they want to build momentum for the interim deal to evolve into negotiating a follow-up, permanent settlement of the nuclear crisis.

A permanent end to the Iranian nuclear crisis, and the much larger lifting of sanctions accompanying it, would set off a far larger scramble of Western businesses to Iran than is taking place today.

A U.S. official said on January 17 that the $4.2 billion of Iranian funds freed up under the interim deal is only a fraction of its total $100 billion of frozen foreign-exchange assets around the world.

That is a huge pot of money that could be spent on modernizing Iran's economy. But beyond it lies access to the Iranian market itself -- a still larger prize.

Iran has some 80 million consumers and a $500 billion economy, the third-largest in the region after Turkey and Saudi Arabia. Today, that economy is tied commercially to China and India and closed to the West -- a situation many Western companies would like to change.

Radio Farda correspondent Hannah Kaviani contributed to this report
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Comment Sorting
Comments
     
by: Mamuka
January 20, 2014 20:02
There is a taxi company in Tbilisi that has a large fleet of Iran Khodro (meaning Iran Car, I think) taxis. Supposedly they are not bad cars, basically a modified Peugeot. I suppose if there were an easing of sanctions there could be more sales and it would be easier to get spare parts. If only the Iranians wanted to buy Georgian wine! Well I'm sure some do but you know... anyway they can still buy Borjomi.

by: RD
January 20, 2014 21:55
The world is sick and tired of Israel's unreasonable efforts to sabotage any negotiations with Iran. Negotiations and confidence building with Iran are beneficial for everyone (i.e. Iran and the west), and should not be scuttled just because Israel demands it. Israel keeps on using Iran's nuclear program as an excuse to suspend any talks with the Islamic Republic. However, its main concern is Iran's potential economic rise, which in turn will mean Iran will gain economic clout in the Middle East, challenging Israel.

by: Eugenio from: Vienna
January 21, 2014 09:53
Aha, it looks like George W Obama did not just "remove" Bashar al-Assad from power in Syria, not only did he "destroy" the Hezbollah movt in Lebanon, but he also completely "suffocated" the Islamic Republic of Iran, so that all the mollahs are running away in despare, whereas the Western democratic values triumph in the Middel East.
Good job, guys, congratulations :-))!
In Response

by: citizen from: kenya
January 25, 2014 08:38
Eugnio, you must be living in a fool's paradise. Israel suffers from Masada complex - can't live amicably with the rest of the world. Any country that has built walls around it to keep away others did collapse because of lack of human interface with others to learn to live with neighbors. It is just a matter of time the Apartheid State will have to collapse from within just like white South Africa did.
In Response

by: Alex from: USA
February 08, 2014 19:50
You are the one living in a fool's paradise Citizen. Israel is not "closed", it conducts plenty of trade with EU, US, & Canada b/c those places import massive amounts of hitech innovations that brilliant Israelis invent. Building a wall to keep out goat herder terrorists, to prevent another blood-soaked terrorist intifada, is a rational & responsible precaution on the part of Israel's govt

by: PermReader
January 22, 2014 12:26
EU losers with Barak Hussein will soon get nuklear spring in Mid East.Like in the nazi Germany times big business is happy to "help" Iran.
In Response

by: Hasbra Detective from: USA
January 24, 2014 14:18
Perm Reader and its other hasbra brigade's filthy community don't stop spreading the zionist lies! Lies about things that don't exist, things such as an Iranian nuclear weapons program, kind of similar to the myth about Iraq and its WMD back in 2002-3!! Everything spread by the apartheid regime of Israel is a lie and should not be taken seriously, especially when they have a nuclear weapons program of their own with an estimated 200-400 nuclear warheads hidden in the desert under dimona nuclear facility in israel......
In Response

by: Alex from: USA
February 08, 2014 19:59
U are on your own planet. Israel is the ONLY non-apartheid regime in the region b/c it's the only one where women have more rights than cattle, & the only one where minorities receive the same world-class universal healthcare & education as the majority does. Israel would be foolish not to pursue nukes considering the fact that their neighbors have tried repeatedly to create a 2nd Holocaust there since the very day Israel was reestablished in 1948, & they still propagate pushing the Jews into the Mediterranean in their schools, mosques, & political speeches. And Israel has proven a very responsible steward of their nukes. Iran, on the other hand, is ruled by deranged mullahs who have no grasp on reality & wish for an armageddon so that their messiah (Mahdi) will arrive. It's a fact that those deranged lunatics are pursuing nuke weapons b/c the IAEA has found equipment in Iranian facilities (a trigger mechanism & testing chamber) that can only be used for a nuke bomb. Those mad dogs will 100% be prevented from obtaining nukes, by any means necessary

by: Fred Gosling from: California
January 25, 2014 19:12
Whether West likes it or not, Iran is regional power of Middle East and has the #1 Gas reserve and #3 Oil reseve in the world with a 75 Million population of highly educated work force. Ideologically, they are strong, modern/moderat (compare to the neighbors) and great electoral policy and contorls Afghanistan to Lebanon....sooner or later all powers (P5 +1) need to realize that you can't ignore Iran and if you want the world economy to improve, you need to establish relationship with Iran...Saudi's and Israeli's only like turmoil, tension to get attention and increase terrorism in the region for their own benefit...Anyone who has recently travelled to Iran will immediately recognize that even though they have been under severe sanctions for over 30 years, the country is as modern as Spain/Greece or Portugal with Highways and subways criss crossing the capitol....You can't ignor this major regional power.

by: Gregory Allen Leeds from: Lewes, Delaware, USA
January 27, 2014 04:29
In the rush to relax sanctions that have been proven effective to help stop Iranian influence from spreading to Africa (Senegal)to Asia (Fillipenes), the role Iran played in pre 9/11 planning and support to the Saudi hijackers and the role played by US Army Special Forces and the Iranian Quds force in the Afghan battle in Herat has to be reconciled.Can you explain the combined operation with Iran, Britain and United States special operations people that were completly ignorant of Iranian complicity in the highjackings that led to this attack? This cannot be swept under the rug or "Wagged" away. The families of the slain deserve better.

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