Changes to doing business with Iran
On 16 January 2016 a report was sent to the United Nations Security Council which stated that Iran had taken a series of measures called for by the historic nuclear agreement between Iran, the United Nations Security Council permanent members and Germany (known as the “Joint Comprehensive Plan of Action”).
The lifting of sanctions offers the prospect of real economic opportunities in Iran as the country opens up to the world. However the following should be noted:
Update on Trade Sanctions with Iran
In the long term it is hoped that the lifting of sanctions will allow for a trade and economic relationships to be re-established between Iran and the rest of the world.
Some countries, such as the EU, the United States, Australia, Canada and others, can impose restrictive measures unilaterally. These may be in addition to, or in the absence of, sanctions adopted by the UN Security Council. Such measures are often known as “autonomous sanctions”.
Businesses trading with nations who are subject to autonomous sanctions are advised to seek independent legal advice to ensure that their business does not contravene any other sanctions imposed by these countries.
Restrictions will remain on the trade in nuclear-related material, equipment or technology, ballistic missile related technology and conventional arms. You should check with the UN for confirmation of the restricted products. If you are considering importing or exporting any of the specified sensitive items, you should contact your national government trade ministry so that then can apply to the Security Council for approval.
Transportation of Goods To/ From Iran
The way has now been cleared for direct shipping to return to Iran’s main port (Bandar Abbas) and the main container terminal (Al Rajaie Terminal at Bandar Abbas).
Companies will no longer need to ship goods via other ports, but the speed at which direct shipping returns to Iran will be a decision for the shipping companies.
Find the right local Iran partner
Iran will remain a challenging market to do business in. An opaque regulatory environment, weak commercial law and IP protection, very high tariff levels and problems with corruption mean that companies looking to do business in Iran will need to do their homework. Finding the right local partner will be critical.
Banking
While the lifting of US financial/banking sanctions against non-US banks is expected to facilitate trade between with Iran over time, the speed at which banks from your country opt to re-enter the Iranian market will be up to the bank themselves to decide on the risk they attach to Iran. Companies are advised to consult their banks to confirm comfort levels with facilitating Iran-related trade prior to making any commitments.
Get legal advice
Given the technical nature of the regulations, and the penalties for non-compliance, it’s essential you get independent legal advice if you are contemplating doing business with Iran.
Iran – Key Facts & Opportunities
- Iran is the second largest economy in the Middle East after Saudi Arabia with an estimated nominal GDP of $397bn in 2015.
- It has the second largest population in the Middle East after Egypt with around 80 million people. Over 60% are estimated to be less than 30 years of age and the workforce is highly educated.
- EU trade with Iran currently stands at around $8bn and is expected to quadruple in the next 2 years.
- Iran’s economy is currently reliant on the oil and gas sector, though the country is looking to diversify its economy. Iran also possesses significant agricultural, industrial and service sectors.
- Iran has the second largest gas reserves in the world and fourth largest oil reserves. It has highlighted its desire to increase oil output to 1bn barrels per day in 2016.
- The main imports to Iran are non-electrical machinery, iron and steel, chemicals and related products, transport vehicles, electrical machinery, tools and appliances.
- The Iranian Government is keen to attract foreign investment, with foreign direct investment needed across all major economic sectors.
- Over a trillion $ of investment in infrastructure is likely to be needed over the next 10 years. Key opportunities will also include the energy sector, automotive and airline manufacturing sectors. There may be an increased demand for consumer goods such as electronics and clothing.
