Construction Industry Is Building Momentum in Iran

7 Apr 2016

It is only a little over a few months since the sanctions against Iran were partially lifted, raising optimism amongst Western Industrialists and consultancies wanting to establish new trading relationships with Iranian companies and vice versa.  Already, the fears and doubts are finding their way into the news, due to the on-going lag in the easing of sanctions amongst western financial institutions; the inability to clear trade deals undertaken with the American dollar is understandably bringing about scepticism amongst business owners in Iran about the usefulness of establishing import and export business opportunities with Europe and America.

Not enough trade deals are going through smoothly, as banks with branches in the west still are too afraid to process transactions, due to previous experiences of having been fined for transgressing sanctions arrangements.  This is bound to undermine the confidence of companies in Iran, who may want to expand into more lucrative markets, but are still playing closer to home, where currency transactions are perceived as less of an obstacle to business.

Accusations that the United States are dragging their feet since signing off of the nuclear deal seems to be the case, but whilst Obama is still President, he will want fresh trade with Iran to be one of the successes of his administration.

What About The Lifting of Sanctions?

On January 17^th, when the nuclear-related sanctions officially ended, “measures imposed by the European Union and rules allowing U.S. authorities to go after (emphasis added by WRG) any foreign companies or individuals” who are potentially doing business with Iran mean that any transactions implemented using the American Dollar come within the legal jurisdiction of the USA. 

Given possible FBI ‘entrapment’ exercises, it is vital that any business owners looking west for trade partners seek out expert support in navigating this potential minefield.  U.S. banks are still not allowed to do business with Iran in dollars.  Transactions being processed through the U.S. financial system are still under scrutiny. There are lenders elsewhere who are not effected by this, however.  

So far, there have been some major agreements of contracts announced, raising the hopes of Tehran for relief from relatively constrained living standards. While significant sums of monies are yet to be freed up, companies in Iran looking for new import and export trade leads can obtain the help of professional brokers such as the White Rose Group.

The current situation is causing a lot of confusion for Iranian business leaders; the uncertainty that persists will eventually shift, as inevitably such dramatic changes take time to bed in.   Iranian transactions need not be an obstacle to your successful project management aims, however.  The White Rose Group can offer great advice on your alternatives.

In time, the tide will turn in financial arrangements too, evidenced by the mushrooming interest from foreign companies, we have been discussing here recently in our news.     

The Investment Commission at the Iran Chamber of Commerce has spoken out recently about the lingering difficulties businesses are having.  Reuters, the international news agency have approached the U.S. Treasury for comment on this issue, as the enforcers of sanctions against Iran.  We await their response with interest here at the WRG. 

Iranian companies based in Dubai apparently still cannot get letters of credit to finance deals with trade partners back home, while others have had their business bank accounts closed recently. Clearly, Tehran’s desire to expand oil exports is hampered by the current delays and also recovery of frozen assets to the tune of $100 billion have yet to be delivered.

The Taste Of A Better Trading Future

Iran has established trade agreements valued at around $50 billion with various countries from Germany and Italy in the West, through Russia, to Japan and South Korea in the East Asia.  Deals involve trade, project investment monies and exchange of expertise.

Airbus have been fairly low key in publicising their deal regarding aircraft provision for Iran’s national air company, but one executive recently said that banks were telling them: "Don't be afraid!" Easier said than done perhaps, but we believe that the coming months will be a testing time during which we must all hold our nerve. Lenders have yet to gain assurance of having "complete legal security and clarity".  Time will tell when this will be the turning point for oiling the wheels of business with Iran once more.

Iranian companies meantime need to access good legal advice  in relation to proving “complete separation of European and U.S. divisions of their business,"  according to George Booth, a partner at law firm Pinsent Masons.  The White Rose Group have helped hundreds of businesses over the years navigating the complexities of international trade.  Our partners have helped companies restructure in order to facilitate their business objectives, despite the sometimes seemingly insurmountable difficulties of international arrangements.

Iranian Advice on Finance

Seyed Arash Shahr Aeini, is the Deputy Chief Executive of the Export Guarantee Fund of Iran, an Iranian government agency, who has commented that since January it is only really the smaller banks getting involved in trade transactions for Iranian companies.   He said that so far, this stood at around $50 million and that larger foreign banks needed to also play their part in normalising trade deals. SWIFT, the global payments network, has already reconnected several Iranian banks to its system, allowing for an increase in international transactions recently.

It will inevitably take time before all of the financial logistics are smoothed out.  For instance, there is still a need for banks to accept cheques from holders of accounts with Iranian commercial banks. 

Ali Sanginian, Chief Executive of Amin Investment Bank, Iran's largest investment bank, has blamed the on-going difficulties of reintegrating Iranian lenders on the financial sanctions remaining, banks' fears together with outdated banking and finance technology used in Iran.

Some transactions in euros and other currencies will be permitted under current arrangements, which for the time being is recommended for Iranian companies seeking overseas expansion.