Saturday, May 15, 2021

Global business wary of talks on Iran deal

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When Iran’s nuclear negotiations with world powers began in 2013, hotels and restaurants in the capital Tehran were full of foreign businessmen eager to tap an intact market.

“In this office in 2014 and 2015, we received a long line of what we called ‘business tourists’ who offered us different types of businesses, many of which were not relevant to us and to the Iranian market. Said a director of Griffon Capital, an asset management and private equity group. “We stopped taking meetings because it was going crazy.”

But the 2015 nuclear deal nearly collapsed three years later when the United States abandoned it and imposed sanctions that limited trade with the Islamic Republic. As a result, the French Total, Airbus, Peugeot and the American Boeing withdrew billions of dollars in agreements.

While President-elect Joe Biden has vowed to revive the deal on condition that Iran returns to full compliance, this time the companies are more wary. With Iran reluctant to expand nuclear talks to include its military and regional policies, there is a lot of uncertainty.

“Investors have started to approach us, but with caution. We are also careful. Both parties are taking their time and no longer dreaming about what a nuclear deal can do, ”said the Griffon Capital CEO, who recalls that the company had bought some of the shares of its foreign partners during the their departure. People no longer think that “Iran’s doors will open and big foreign companies will come”.

Large companies that left in 2018 are unlikely to return quickly, according to senior Western diplomats. The few people who remained but reduced will increase if given the green light from the United States, they said.

Some foreign entities have stayed and established partnerships with Iranian, Turkish and Emirati investors, but since found that they had not been able to repatriate their profits due to the sanctions and instead reinvested and developed in Iran.

“The biggest problem for the companies that have remained is the difficulty in getting their money in or out of the country, while the fall of the national currency as well as the loss of the American market has been a heavy punishment,” said one man. business dealing with Iran. and European companies. “A lot of business people travel with suitcases full of money. You can handle this situation for a while, but it is not sustainable. “

At the same time, as the global economy has grown, the Iranian economy has remained largely static, a director of Griffon Capital said. “In relative terms, the strategic value of the Iranian market in 2005, for example, was much greater than it is today. A billion dollar business in Iran was a lucrative opportunity for a major European bank years ago, but now it may not be worth the compliance risks, ”said the director.

Small foreign businesses are open to increased trade with Iran. Last month, around 100 Italian companies from the tech, machinery and banking sectors attended a webinar hosted by the Italy-Iran Chamber of Commerce in Rome, according to a participant. “Companies have shown a lot of willingness to increase or start new businesses [ in Iran]The person said. “But the message from the Italian bankers was clear: Guys, we can’t support your business without a decree from the US administration.”

With inflation close to 50 percent, youth unemployment at 16.9 percent and the falling rial, the Iranian economy has been hit hard by the sanctions, as have Western exporters, in many cases supplanted by Chinese.

Iranian analysts, however, say the pockets of the economy remain resilient and, despite recent declines, stocks are buoyed by the fact that investors have nowhere to put their money. Since 2016, Griffon Capital’s fund has had a return on investment of over 100% in euros, the second manager said.

Still, the outlook is muted at best.

Iranian President Hassan Rouhani said on Wednesday he was confident his government would produce and sell more crude oil next year, a sign that he hopes to resume negotiations before resigning next summer.

However, the Islamic Republic is concerned that the talks will be broadened to include regional and military issues as well as its human rights record. Iran executed Ruhollah Zam, a dissident who allegedly spied for Israel and France on Saturday. The EU, France – where he resided – Canada and Germany, as well as human rights organizations condemned the murder.

“In all scenarios, Iran will do better next year than it did in 2019 and 2020,” said a foreign businessman in Tehran, who remained in the country during the last decade. “The key for Iran will be how many barrels of oil it can sell.”

But rather than a big return to growth if negotiations resume, “what seems more likely is this. . . we don’t have to wake up in the morning with a lot of stress about new sanctions or even the possibility of war, ”said the Griffon business manager.

“When it comes to penalties, it’s like an aggressive tumor in your body has suddenly stopped growing,” the business manager added. “This is good news, but you still have this cancer in your body and you don’t know how it will behave.”

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