European companies beat US to Iran business after nuclear deal reached
http://www.theguardian.com/business/2015/aug/25/europe-us-iran-business-nuclear-deal-sanctions Version 0 of 1. The ink was barely dry on the agreement with Iran to limit its nuclear programme before a German government plane packed with the nation’s economic elite touched down in Tehran. The trip was the first in a rush of European ministers and business people flocking to a market poised to reopen after years of grinding sanctions. Upscale Tehran hotels are packed and tables at trendy restaurants are scarce as foreigners jostle for bargains, even amid uncertainty over whether President Obama can overcome US congressional opposition to the deal. The stream of visitors to Tehran is the latest sign of the Atlantic-wide divide between the US and Europe, where there is scant opposition to the pact that aims to crimp Iran’s nuclear ambitions. Barack Obama and secretary of state John Kerry have warned detractors that they would be unable to reimpose a multinational trade embargo if congress rejects the plans. The other five countries that helped broker the deal have also told congress they will not return to the negotiating table. The trips show that US leaders can’t keep Europeans from flying to Tehran ahead of the congressional vote, which must take place by 17 September. “We are talking here about 80 million people who need energy supplies, who naturally also need healthcare, who want to get back off their knees in the oil and gas businesses. There are opportunities and chances,” Joe Kaeser, chief executive of Siemens, the German industrial conglomerate, told German television last month. Siemens sent a top official to Tehran with the German vice chancellor, Sigmar Gabriel, last month. Their government plane touched down at the Imam Khomeini international airport five days after world powers agreed on the nuclear deal on 14 July. “The agreement reached between the E3/EU+3 and Iran in Vienna has laid the foundations for a normalisation of economic relations with Iran,” Gabriel said, using another term for the group of six world powers that negotiated the deal. The vice chancellor was accompanied by a delegation of top officials from some of Germany’s largest companies, including Daimler, Volkswagen and ThyssenKrupp. Since Gabriel’s visit, top ministers from France and Italy have visited Tehran. British foreign secretary Philip Hammond was there last weekend to reopen his nation’s embassy. Spain, Sweden and Poland plan to follow in the autumn. Next month Austrian president Heinz Fischer plans to be the first European head of state to visit Tehran since 2004. Vienna hosted an EU-Iran trade conference just a week after the deal was signed. “A lot of companies at the moment are preparing agreements to be signed the moment sanctions are lifted,” said Michael Tockuss, head of the German-Iranian Chamber of Commerce. He said that his association was organising a trip every week for companies interested in doing deals in Iran. Any western business deals with Iran are still riddled with legal uncertainties. Multinational companies that do business in the US don’t want to be targeted by US sanctions if congress ultimately rejects the deal. The US treasury department also has powerful sway over the international finance system, making it difficult for money to flow to and from Iran and crimping even deals that are legal under the current sanctions regime. That doesn’t even touch on what would happen if Iran violates the deal, triggering snapback sanctions that could gobble western money invested there. But despite concerns, agreements are already being signed – with government stamps of approval. Italian bank Mediobanca signed a memorandum of understanding in Tehran earlier this month to finance deals between Italian and Iranian businesses. The loans would be guaranteed by Italy’s state-run export credit company, which estimated that removing sanctions could increase Italian exports to Iran by $3.3bn by the end of 2018. “There is no particular reason why the Europeans would let themselves be affected by US self-inflicted injuries,” said Francois Heisbourg, a defence analyst at the Paris-based Foundation for Strategic Research. Congressional rejection of the deal might thwart some investment in Iran in the short run, he said. But over the years European businesses would probably find ways to circumvent any financing restrictions. European businesses have been salivating over the prospects of a deal, with leaders readying themselves to sign contracts as soon as it is legal for them to do so. “Iran is an El Dorado for oil,” said Paolo Scaroni, who when he headed the Italian energy giant Eni met with Iranian oil minister Bijan Namdar Zanganeh about potential investments. At the time of the December 2013 meeting, Scaroni said, “there was already a kind of smell that sanctions might be reduced or eliminated.” But as the rush picks up between Europe and Tehran, the US-Iran contacts have been far quieter. In the short term most US businesses stand to gain far less than their European counterparts, even though many Iranians covet US goods and would gladly pay a premium for them. The July deal only lifts sanctions related to Iran’s nuclear programme, leaving in place many US restrictions that are pinned to Iran’s support of terrorism and human rights abuses. Most of our clients recognise that this will not be business as usual for probably many years to come The Iran deal nevertheless opens the door for some US companies to expand their business with the Islamic republic and lays the groundwork for more trade and investment in future years. A separate clause in the agreement allows for the sale of commercial aircraft and parts to Iran, which wants to buy at least 400 new planes over the next decade from both Boeing and Airbus. Given the size of the Iranian market and its affinity for American products, Richard Nephew, the lead US sanctions expert negotiating with Iran until early this year, said he has been surprised more US companies haven’t been openly advocating for the deal as congress prepares to vote on it. When he asked a corporate executive why recently, he explained doing business with Iran can have “reputational consequences”. “But three, four or five years from now, I can see them going to congress and saying, ‘The Europeans are making a mint, while we’re off in the side lot’ and asking for a change,” Nephew said. “It comes down to perceptions if the remaining sanctions are stopping terrorism and violations of human rights.” Many US businesses do not expect to set up shop in Tehran for some time. “Most of our clients recognise that this will not be business as usual for probably many years to come,” said William McGlone, a Washington lawyer who specialises in sanctions. Current sanctions allow a limited amount of trade with Iran in areas intended to alleviate human suffering, like drugs, food and medical equipment. In practice, however, a lot of companies don’t take full advantage of them because the sanctions leave only a limited number of companies that facilitate the trade. “I can under the law send an MRI machine with a permit,” said Farhad Alavi, a sanctions lawyer with the Akrivis Law Group in Washington. “But it’s hard to find a company to ship it. It’s hard to get paid. With the US removal of penalties, third-country companies might come into the fray.” Alavi said most of the companies that have contacted him since the deal are taking a long view of investment prospects, but he said they may find the Europeans are already entrenched in the market. “Iran is on everybody’s radar,” he said. This article appeared in Guardian Weekly, which incorporates material from the Washington Post Related: British embassy in Iran reopens |